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61st  Congress'! 
2d  Sessio7i  J 


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/Document 
\  No.  571 


NATIONAL  MONETARY  COMMISSION 

> _ 


The 

First  and  Second  Banks 
of  the  United  States 


By 

JOHN  THOM  HOLDSWORTH,  Ph.  D. 

and 

DAVIS  R.  DEWEY,  Ph.  D. 


BOSTON  COLLEGE  SCHCQt 

BUSINESS  AOMIN. 


% 


Washington  :  Government  Printing  Office  :  1910 


1/ 


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I  i 


NATIONAL  MONETARY  COMMISSION. 


Nelson  W.  Aldrich,  Rhode  Island,  Chairman. 
Edward  B.  VreELAND,  New  York,  Vice-Chairman. 


Julius  C.  Burrows,  Michigan. 
Eugene  Hale,  Maine. 

Philander  C.  Knox,  Pennsylvania. 
Theodore  E.  Burton,  Ohio. 

John  \V.  Daniel,  Virginia. 

Henry  M.  Teller,  Colorado. 
Hernando  D.  Money,  Mississippi. 
Joseph  W.  Bailey,  Texas. 


Jesse  Overstreet,  Indiana. 
John  W.  Weeks,  Massachusetts. 
Robert  W.  Bonynge,  Colorado. 
Sylvester  C.  Smith,  California. 
Lemuel  P.  Padgett,  Tennessee. 
George  F.  Burgess,  Texas. 
Arsene  P.  Pujo,  Louisiana. 
Arthur  B.  Shelton,  Secretary. 


A.  Piatt  Andrew,  Special  Assistant  to  Commission. 


TABLE  OF  CONTENTS. 


THE  FIRST  BANK  OF  THE  UNITED  STATES. 

By  John  Thom  Hoidsworth,  Ph.  D.,  of  the  University  of  Pittsburgh. 


Hamilton’s  plan  of  1779 _ 

Hamilton’s  plan  of  1781 _ _ 

Hamilton’s  report  in  1790 _ 

Establishment  of  the  bank _ 

Charter  provisions  _ 

Subscriptions  for  stock _ 

Organization _ 

By-laws  and  regulations _ 

Paying  in  of  capital _ _ _ 

Paying  in  of  capital  by  the  Government _ 

Election  of  directors _ 

Branches _ 

Relation  of  state  banks _ 

Loans  to  the  Government _ 

The  government  sale  of  bank  stock _ 

Circulating  notes  _  *■=-: ! _ 

Counterfeiting  of  notes _ 

Cooperation  with  the  mint _ 

The  Treasury  and  the  bank — Foreign  exchange  operations 

Government  deposits _ _ _ 

Aid  to  importers _ 

Attitude  of  Democratic  administrations  toward  the  bank__ 

Gallatin’s  defense  of  the  bank  in  1803 _ 

Application  for  recharter _ 

Recharter  favored  by  Gallatin _ 

Modifications  recommended  by  Gallatin - 

Indecisive  action  by  Congress _ _ 

Second  petition  for  recharter _ 

Attitude  of  banks  and  trade  organizations _ 

Memorials  and  popular  discussion _ 

Debate  on  recharter _ ‘ - — 

Temporary  extension  refused _ 


Page. 

9 

10 

13 

17 

19 

22 

25 

27 

29 

31 

34 

36 

40 

42 

48 

49 

52 

53 

54 
58 

63 


72 

74 

76 

78 

80 

83 

85 

90 

97 


3 


N  at  io  n  a  l  M  o  n  e  t  a  r  y  Commission 


Page. 

State  charter  refused _  98 

Charter  granted  to  New  York  stockholders -  100 

Girard’s  bank _  102 

Fiscal  operations  after  dissolution  of  bank -  105 

Liquidation _ 107 

Consequences  of  dissolution _  109 

Bank  reports _  in 

Profits  and  dividends _  119 

Taxation _  122 

Conservatism,  a  characteristic -  123 

Appendices: 

A.  Act  of  incorporation _  126 

B.  Ordinance  and  by-laws  of  the  bank - 133 

C.  Quotations  of  bank  stocks _  136 

D.  Dividends _  137 

E.  Records  and  accounts  of  the  bank _  138 


THE  SECOND  UNITED  STATES  BANK. 

By  Davis  R.  Dewey,  Ph.  D.,  of  the  Massachusetts  Institute  of  Technology. 


Page. 

Preface _  147 

Debate  on  plans _  149 

Relation  to  state  banks  in  resuming  specie  payments _  157 

'^'  Comparison  of  charters  of  First  and  Second  United  States  banks _  163 

Payment  of  capital _  175 

Friction  in  transfer  of  public  deposits _  181 

The  conflict  over  the  acceptance  of  State  bank  notes _ _  188 

Branches _ 194 

Ownership  of  stock _  202 

Loans  on  bank  stock _  204 

Change  in  character  of  capital _ 210 

Government  deposits _  21 1 

Transfer  of  public  funds _  216 

Circulation _  220 

Sale  of  drafts _  230 

Exchange _  234 

Discounts  and  loans _  241 

President  Jackson’s  opposition  to  the  bank _  248 

"—  Charges  against  the  bank— political  activity _  254 

Criticism  of  branch  drafts _ 258 

Criticism  of  other  banking  operations _  261 


4 


N  at  i on  a l  M  o  n  e  t  a  r  y  Commission 


Appendices:  page. 

A.  Act  of  incorporation _  267 

B.  Rules  and  regulations  for  conducting  the  business  of  the 

Bank  of  the  United  States _  282 

C.  Rules  and  regulations  for  the  government  of  the  offices  of 

discount  and  deposit  established  by  the  Bank  of  the 
United  States _  290 

D.  The  bill  to  continue  the  charter,  which  was  vetoed  by  Presi¬ 

dent  Jackson _  296 

E.  Veto  message  of  President  Jackson,  July  10,  1832 _  299 

F.  Balance  sheets  of  bank :  1820,  1825,  1831,  1832 _  308 


5 


The  First  Bank  of  the  United  States 


By 

JOHN  THOM  HOLDSWORTH,  Ph.  D. 

University  of  Pittsburgh 


7 


THE  FIRST  BANK  OF  THE  UNITED 

STATES. 

The  establishment  of  the  Bank  of  the  United  States  in 
1791  was  an  essential  and  vital  part  of  the  general  scheme 
for  the  support  of  public  credit  proposed  by  Alexander 
Hamilton,  first  Secretary  of  the  Treasury.  The  institu¬ 
tion  of  a  national  bank  Hamilton  regarded  as  “an  indis¬ 
pensable  engine  in  the  administration  of  the  finances.”  a 

Hamilton's  Plan  op  1779. 

This  conception  of  the  utility  of  a  bank  was  not  a  matter 
of  impulse  or  sudden  exigency.  As  early  as  1779,  Hamil¬ 
ton  wrote  to  Robert  Morris  favoring  a  bank  of  issue  based 
on  landed  security. 6  Later,  in  1780,  when  the  Revolu¬ 
tionary  finances  were  at  low  ebb  and  the  currency  of  the 
country  was  demoralized,  Hamilton,  then  serving  in  the 
army,  wrote  to  Morris  discussing  the  financial  situation 
thoroughly  and  proposing  measures  of  relief.  “The  only 
plan  that  can  preserve  the  currency  is  one  that  will  make 
it  the  immediate  interest  of  the  moneyed  men  to  cooperate 
with  the  Government  in  its  support.”  He  proposed  an 
American  bank  with  a  capital  of  $200,000,000.  His 
project  contemplated  a  foreign  loan  of  $10,000,000  “to 
be  thrown  into  the  bank  as  a  part  of  its  stock.”  The 
Government  was  to  guarantee  one-twentieth  of  the  sub-  . 
scrip tion  money  to  the  stockholders,  and  was  itself  to 
share  half  the  stock  and  profits  of  the  bank.  All  the 

a  Hamilton’s  Report  on  Public  Credit,  December  13,  1790. 
b  Hamilton’s  Works  (Hamilton),  Vol.  I,  p.  116. 


9 


National  Monetary  Commission 


remaining  paper  was  to  be  called  in  and  bank  notes 
issued  in  its  stead.  The  bank  was  to  lend  Congress 
£2,000,000  annually  at  4  per  cent.  Hamilton  ques¬ 
tioned  the  necessity  of  so  large  a  capital,  but  he  wished 
to  have  it  large  enough  “to  engage  a  sufficient  number  of 
the  principal  moneyed  men  in  the  scheme.”  This  “hasty 
production”  of  Hamilton’s  was  the  result  “of  some  read¬ 
ing  on  the  subjects  of  commerce  and  finance,”  but  in  the 
ten  years  which  intervene  before  Hamilton’s  great 
project  for  a  national  bank  materializes  his  ideas  on  the 
subject  undergo  considerable  change. 

Hamilton’s  Plan  of  1781. 

On  April  30,  1781,  Hamilton,  whose  mind  ran  constantly 
to  questions  of  government  and  finance,  wrote  again  to 
Morris,  who  had  recently  been  appointed  Superintendent 
of  Finance.0  Hamilton  had  great  respect  for  Morris, 
and  he  was  eager  to  render  him  every  aid  possible.  In 
this  letter,  discussing  ways  and  means  of  raising  revenue, 
Hamilton  renews  his  suggestion  of  a  national  bank.  He 
proposes  a  bank  with  a  capital  of  £3,000,000  (though  he 
thought  it  would  succeed  if  only  half  that  amount  were 
obtained)  founded  in  part  upon  landed  security.  Thus  a 
subscriber  of  from  6  to  15  shares  (£500  each)  should  pay 
one-half  in  specie  (or  plate  or  bullion),  the  other  half  in 
good  landed  security.  Subscribers  to  16  shares  and 
over  should  pay  one-third  in  specie,  one-sixth  in  foreign 
bills  of  exchange,  and  one-half  in  good  landed  security. 
Hamilton  recognized  that  to  procure  so  much  specie  resort 
would  have  to  be  made  to  foreign  assistance,  for  he  esti- 

°  Hamilton’s  Works,  Vol.  I,  p.  223;  Dunbar,  Economic  Essays,  pp. 
89-90. 


10 


First  Bank  of  the  United  States 


mated  that  in  all  of  the  States  there  was  not  more  than 
$6,000,000.  The  United  States,  or  a  particular  State,  or 
foreigners  might  subscribe  in  sums  not  to  exceed  one-half 
the  capital.  The  notes  were  to  be  payable  in  pounds, 
shillings,  and  pence  “to  produce  an  illusion  in  the  minds 
of  the  people  favorable  to  the  new  paper,”  or  rather  to 
escape  by  a  change  of  nomenclature  the  universal  preju¬ 
dice  against  the  old  continental  currency,  which  was 
payable  in  dollars.  Notes  under  20  shillings  were  to  bear 
no  interest;  above  that  sum  they  were  to  bear  4  per  cent. 
This  latter  device  was  to  give  them  preference  over 
specie,  and  prevent  a  run  upon  the  bank.  Gradually  the 
interest  was  to  be  reduced  to  2  per  cent.  Some  of  the 
notes  were  to  be  payable  in  Europe  as  well  as  at  home,  so 
as  to  enable  the  bank  to  use  its  funds  there  and  to  increase 
the  demand  for  bank  notes  by  making  them  useful  in 
foreign  commerce.  Eoans  were  to  be  made  at  a  rate  not 
above  8  per  cent.  The  bank  might  purchase  estates  and 
coin  money  to  the  amount  of  half  its  capital.  This  latter 
provision  was  necessary  because  the  bank  might  receive 
plate  or  bullion  as  subscriptions,  and  profit  might  result 
from  converting  these  into  coin.  The  bank  was  to  have 
the  right  to  contract  with  the  French  Government  for 
the  supply  of  its  armies  and  fleets  in  America  and  to 
contract  with  Congress  for  the  supply  of  its  armies.  A 
loan  of  £1,200,000  at  8  per  cent  was  to  be  made  to 
Congress,  for  the  payment  of  which  a  sinking  fund  of 
£110,400  per  year  was  to  be  established  for  twenty  years, 
and  the  States  generally  and  severally  were  to  pledge 
themselves  for  its  payment.  The  bank  was  to  be  char¬ 
tered  for  thirty  years  “by  way  of  experiment,”  and  no 


National  Monetary  Commission 


other  bank  was  to  be  permitted  during  that  period. 
Three  agencies  were  to  be  established,  one  each  in  Massa¬ 
chusetts,  Pennsylvania,  and  Virginia,  to  facilitate  the 
circulation  and  payment  of  the  notes.  Hamilton  thought 
they  should  be  located  in  the  interior,  distant  from  the 
leading  trading  centers,  so  as  to  “make  applications  for 
the  payment  of  bank  notes  less  convenient.”  The 
management  of  the  bank  was  to  be  in  the  hands  of  12 
directors,  8  to  be  chosen  by  the  stockholders  and  4  by 
Congress.  Commenting  upon  this  proposed  plan,  Ham¬ 
ilton  says  that  if  the  leading  principles  of  his  scheme  be 
approved,  “the  structure  may  easily  be  determined.  We 
shall  find  good  models  in  the  different  European  banks, 
which  we  can  accommodate  to  our  circumstances/’0 

Hamilton  later  came  to  realize  that  land  was  not  the 
proper  security  for  bank  notes.  In  1784,  Chancellor  Liv¬ 
ingston,  of  New  York,  fathered  a  project  for  a  land  bank  in 
that  city,  and  application  was  made  to  the  state  legislature 
for  an  exclusive  charter.  Hamilton,  by  this  time  thor¬ 
oughly  convinced  of  the  folly  of  such  an  enterprise,  started 
an  agitation  for  a  bank  founded  on  a  more  solid  basis.6 
Out  of  this  movement  grew  the  Bank  of  New  York,  the 
constitution  of  which  was  drawn  by  Hamilton  himself.0 
Hamilton  became  a  director  of  the  bank,  and,  though  this 
relation  was  severed  in  1788,  he  always  showed  a  lively 
interest  in  its  prosperity,  and  threw  many  favors  in  its 
way,  when  that  was  legitimately  permissible,  during  his 

0  Many  of  Hamilton’s  suggestions  were  incorporated  in  Morris’s  report  to 
Congress  recommending  the  establishment  of  the  Bank  of  North  America. — 
Knox,  History  of  Banking,  p.  40. 

b  Hamilton  to  J.  B.  Church,  March  10,  1784. 

c  Domett,  Bank  of  New  York,  p.  n. 


12 


First  Bank  of  the  United  States 


administration  of  the  federal  finances.  In  return,  the 
directors  of  the  bank  were  prompt  to  respond  when  called 
upon  to  assist  the  Government  with  temporary  loans. 
For  several  years  the  Bank  of  New  York  carried  on  business 
under  the  articles  of  association  drawn  by  Hamilton,  but 
finally,  after  repeated  failures,  it  secured  a  charter  as  an 
incorporated  concern,  March  21,  1791.  At  that  time 
Hamilton  held  one  and  a  half  shares  of  its  stock  (par 
$500). a 


Hamilton’s  Report  in  1790. 

In  December,  1790,  Hamilton  submitted  an  elaborate 
report  on  the  subject  of  a  bank  to  be  founded  under  a 
national  charter.  He  clearly  appreciated  the  popular 
prejudice  against  the  establishment  of  banks,  and  conse¬ 
quently  devoted  a  large  part  of  his  argument  to  the  defense? 
of  banking  institutions  and  a  bank-note  currency.  He 
anticipated  possible  objections  by  noting  the  successful 
experiences  of  public  banks  among  the  principal  and  most 
enlightened  commercial  nations  of  the  world.  In  those 
countries  the  experience  of  centuries  showed  that  such 
banks  rendered  invaluable  service  both  to  the  Government 
and  to  trade.  The  Government  of  the  United  States,  too, 
not  only  in  the  critical  period  of  the  recent  war,  but  also  in 
times  of  peace,  had  received  from  the  banks  indispensable 
aid.  His  discussion  was  undoubtedly  the  most  informing  . 
and  illuminating  presentation  of  banking  principles  and 
practice  known  to  American  literature  up  to  that  time. 

It  did  much  to  remove  misunderstanding  regarding  bank¬ 
ing  institutions,  and  incidentally  it  furnished  an  arsenal 


a  Domett,  Bank  of  New  York,  p.  132. 


\ 


13 


National  Monetary  Commission 


f 


of  arguments  for  the  defense  of  the  proposed  bank  in  the 
debates  which  followed  in  Congress. 

The  first  advantage  which  Hamilton  claims  for  the  bank 
is  “the  augmentation  of  the  active  or  productive  capital  of 
a  country.”  He  means  by  this  not  the  creation  of  addi¬ 
tional  capital,  but  more  effective  utilization  of  capital  by 
which  scattered  and  otherwise  idle  amounts  are  concen¬ 
trated  and  made  to  serve  the  uses  of  business.  He 
states  that  the  great  proportion  of  the  notes  issued 
are  “indefinitely  suspended  in  circulation;”  “that  large 
sums  are  transferred  by  check”  without  the  interven¬ 
tion  of  a  single  piece  of  coin;  “that  deposits  for  safe¬ 
keeping  as  well  as  for  accommodation  ”  form  an  “  effective 
fund  ”  for  the  operations  of  the  banks,  for,  even  if  they  are 
withdrawn,  they  are  speedily  replaced,  as  money  “much 
oftener  changes  proprietors  than  place,”  and  not  only  is 
the  quantity  of  money  increased,  but  its  circulation  is 
“  quickened.”  Without  notes  coin  must  be  remitted  from 
place  to  place  with  “trouble,  delay,  expense,  and  risk.” 
Bank  notes,  howrever,  can  be  transmitted  by  post  or  other 
convenient  conveyance.  With  their  use,  therefore,  the 
metals  are  not  “suspended  from  their  usual  functions 
during  this  process  of  vibration  from  place  to  place,”  but 
“continue  in  activity.” 

Hamilton  laid  great  stress  upon  the  advantage  of  a  bank 
in  making  loans  to  the  Government,  especially  in  sudden 
emergencies,  and  in  facilitating  the  payment  of  taxes. 
This  latter  benefit  had  been  demonstrated  in  places  where 
banks  already  existed.  These  governmental  advantages 
were,  doubtless,  foremost  in  Hamilton’s  mind.  A 
national  bank  to  him  was  not  “a  mere  matter  of  private 


14 


First  Bank  of  the  United  States 


property,  but  a  political  machine  of  the  greatest  impor¬ 
tance  to  the  state.”  Thus  conceived  as  a  political  machine, 
the  Bank  of  the  United  States  never  threw  off  entirely  its 
political  trappings,  and  it  finally  died  as  the  result  of 
political  enmities  and  jealousies. 

The  most  serious  charges  against  banks  were  that  they 
served  to  increase  usury;  they  tended  to  prevent  other 
kinds  of  lending;  they  furnished  temptations  to  over¬ 
trading;  they  afforded  aid  to  ignorant  adventurers  who 
disturbed  the  natural  and  beneficial  course  of  trade;  they 
gave  to  bankrupt  and  fraudulent  traders  a  fictitious  credit, 
enabling  them  to  maintain  false  appearances  and  to 
extend  their  impositions;  and  they  tended  to  banish  gold 
and  silver  from  the  country.  Hamilton  reviewed  these 
charges  and  either  refuted  them  or  opposed  counter¬ 
balancing  advantages. 

Hamilton  concluded  the  introduction  to  his  national- 
bank  scheme  by  arguing  strongly  against  the  issue  of 
paper  by  the  Government  and  in  favor  of  bank  issues  pay¬ 
able  in  coin. 

Having  demonstrated  the  desirability  of  a  national 
bank,  Hamilton  next  considered  the  possibility  of  utilizing 
one  of  the  three  existing  banks — the  Bank  of  North 
America,  in  Philadelphia,  the  Bank  of  New  York,  and  the 
Bank  of  Massachusetts.  He  considered  only  the  Bank 
of  North  America,  the  only  one  of  the  three  which  had 
had  at  any  time  a  direct  relation  to  the  Government. 
While  paying  willing  tribute  to  the  great  services  of  that 
bank  to  the  United  States  during  the  Revolution  and  .the 
aid  it  had  extended  after  the  war,  he  reasoned  that  it 
lacked  certain  of  the  essential  requisites  of  a  national 


15 


Na  t  ion  a  l  M  on  e  t  ary  Commission 

bank.  This  bank,  chartered  originally  by  the  Continental 
Congress,  had  afterward  accepted  and  acted  under  a  new 
charter  from  the  State  of  Pennsylvania,  which  greatly 
narrowed  its  scope.  The  original  capital  was  $10,000,000, 
but  this  had  been  reduced  in  the  state  charter  to  $2,000,000, 
which  would  not  insure  “the  requisite  aid  to  the  Govern¬ 
ment  nor  the  requisite  security  to  the  community.” 
Another  objection  raised  by  Hamilton  was  that  the 
charter  of  the  Bank  of  North  America  did  not  provide 
for  rotation  in  the  board  of  directors.  This  principle 
he  regarded  as  essential  in  that  it  would  lessen  the 
danger  of  combinations  among  the  directors  to  use  the 
bank’s  influence  for  partisan  purposes  or  to  monopolize  its 
funds  for  the  accommodation  of  any  particular  set  of  men 
or  interests.  Danger  of  a  monopolization  of  the  power 
and  benefits  of  the  bank  lay,  also,  in  the  principle  of  one 
share  one  vote  recognized  in  the  charter  of  the  Bank  of 
North  America.  And,  finally,  that  bank  did  not  guard 
against  the  influence  of  foreigners  by  prohibiting  them 
from  becoming  directors  or  voting  by  proxy.  If,  how¬ 
ever,  that  institution  should  be  willing  to  make  such 
changes  as  were  “necessary  to  the  due  extent  and  safety 
of  a  national  bank,”  every  reasonable  facility  should  be 
offered  it  to  do  so,  not  only  because  of  its  earlier  relation 
and  services  to  the  Government,  but  also  because  its 
cooperation  would  remove  the  possibility  of  a  collision 
of  the  two  institutions.  The  Bank  of  North  America, 
however,  showed  no  disposition  to  undertake  the  reor¬ 
ganization  which  would  have  been  necessary  to  bring  it 
into  accord  with  Hamilton’s  plan.  “The  quiet  and 
prosperous  business  in  which  they  were  engaged,  under 


16 


First  Bank  of  the  United  States 


state  auspices,  was  to  them  preferable  to  the  anxieties 
and  hazards  which  would  probably  attend  the  new  national 
undertaking.”® 

Establishment  of  the  Bank. 

The  bill  to  charter  the  Bank  of  the  United  States  was 
introduced  in  the  Senate  December  23,  1790,  and  was 
debated  there  until  January  20,  when  it  was  transmitted 
to  the  House.  On  January  31  the  House  went  into  Com¬ 
mittee  of  the  Whole  for  the  consideration  of  the  bill.  It 
was  opposed  by  Madison  and  18  others,  all  of  whom,  with 
one  exception,  were  members  from  the  Southern  States. 
The  debate  was  concentrated  largely  upon  the  question 
of  the  constitutionality  of  the  proposed  bank.* 6  Madison 
and  his  supporters  assailed  the  constitutional  authority 
of  Congress  to  incorporate  a  national  bank.  He  argued 
that  the  question  of  authority  to  incorporate  a  bank  had 
arisen  in  relation  to  the  Bank  of  North  America  under  the 
old  Confederation  and  that  the  constitutional  convention 
had  specifically  refused  to  include  among  the  powers  of 
Congress  that  of  incorporation,  because  this  might  be 
construed  to  confer  power  to  establish  a  bank.  The 
advocates  of  the  bank,  however,  met  this  argument  with 
the  claim  that  there  was  nothing  particularly  awe-inspiring 
or  sovereign  about  acts  of  incorporation ;  that  the  erection 
of  a  bank  was  merely  an  act  of  legislative  expediency, 
clearly  included  in  the  implied  powers  of  Congress  under 
the  Constitution. 

0  Lewis,  History  of  Bank  of  North  America,  p.  79. 

6  Clarke  and  Hall,  Legislative  and  Documentary  History  of  the  Bank  of 
the  United  States,  pp.  36-85. 


7069 — IQ 


2 


17 


National  Monetary  Commission 


After  a  week’s  debate  the  bill  was  passed,  February  8, 
by  a  vote  of  39  to  19.  This  was  not  a  strictly  party  vote, 
for  11  of  those  who  voted  for  the  bank  were  Democrats, 
while  6  Federalists  voted  against  it;  but  it  afterwards 
became  “  one  of  the  landmarks  of  party,  and  in  the  Second 
Congress  a  resolution  declaring  the  bank  charter  uncon¬ 
stitutional  was  within  one  vote  of  passing  the  House.”  0 
As  the  bank  bill  reached  its  final  stages  numerous 
attempts  were  made  to  limit  the  scope  or  the  life  of  the 
proposed  institution.  A  motion  in  the  Senate  to  ex¬ 
punge  the  section  providing  that  no  other  bank  should 
be  established  by  the  United  States  was  defeated. b  An¬ 
other  motion  to  add  a  clause  that  nothing  should  prevent 
Congress  from  abolishing  the  corporation  after  May  4, 
1802,  was  likewise  voted  down.c  On  January  13,  1791, 
a  motion  to  limit  the  term  of  the  charter  to  seven  years 
was  met  by  another  motion  to  extend  it  to  March  4,  1815, 
both  of  which  were  postponed. d 

The  bill  was  presented  to  the  President  February  14, 
1791.  Washington  gave  it  anxious  and  diligent  consid¬ 
eration.  The  question  of  its  constitutionality,  which 
had  been  the  chief  ground  of  controversy  and  opposition 
in  Congress,  was  carefully  considered  by  the  President. 
To  aid  him  in  reaching  a  sound  decision,  he  asked  three 
of  his  cabinet  advisers  for  their  written  opinion.  The 
Attorney-General  (Randolph)  and  the  Secretary  of  State 
(Thomas  Jefferson)  argued  against  the  constitutionality 
of  the  bank,  but  Hamilton,  Secretary  of  the  Treasury,  to 

a  Gouge,  Paper  Money  and  Banking,  p.  38. 
b  Annals  of  Congress,  Vol.  II  (1789-1791),  p.  1748. 
c  Ibid.,  p.  1769. 
d  Ibid.,  p.  1745. 

18 


First  Bank  of  the  United  States 


whom  these  opinions  were  submitted  by  Washington, 
swept  away  their  arguments  so  completely  that  Wash¬ 
ington  signed  the  bill,  February  25,  1791.® 

Charter  Provisions. 

The  bill  provided  for  a  Bank  of  the  United  States  to  be 
located  in  Philadelphia  with  a  capital  of  $10,000,000, 
divided  into  25,000  shares  of  $400  each.  One-fourth 
of  all  subscriptions,  private  and  corporate,  was  to  be 
paid  in  specie,  and  three-fourths  in  United  States  stock 
bearing  6  per  cent  interest,  payable  in  four  equal  semi¬ 
annual  payments.  The  President  of  the  United  States 
was  authorized  to  subscribe,  on  behalf  of  the  United 
States,  $2,000,000,  a  loan  of  equal  amount  to  be  made 
by  the  bank,  which  was  to  be  reimbursed  in  10  equal 
annual  installments.  No  subscription  other  than  that 
of  the  Government  was  to  exceed  1,000  shares.  There 
were  to  be  25  directors,  not  more  than  three-fourths  of 
whom  were  to  be  eligible  for  reelection  the  next  ensuing 
year.  Seven  directors  were  to  constitute  a  quorum. 
No  stockholder,  unless  a  citizen  of  the  United  States, 
could  be  a  director.  The  directors  were  to  elect  a  presi¬ 
dent  who  was  to  receive  a  salary,  but  they  were  to  serve 
without  compensation.  No  foreign  stockholder  might 
vote  by  proxy.  One  share  was  to  have  1  vote,  3  shares 
2  votes,  5  shares  3  votes,  and  so  on  until  100  shares  had  20 
votes.  The  bank  was  allowed  to  issue  notes,  payable 
to  any  person  or  persons,  assignable  and  negotiable,  or 
to  bearer  assignable  by  delivery.  The  notes  were  legal 
tender  in  payment  of  all  debts  to  the  United  States. 


a  Works,  Vol.  IV,  p.  104. 


19 


National  Monetary  Commission 


The  maximum  amount  of  debts  which  the  bank  might 
owe  at  any  time,  except  for  moneys  deposited  for  safe¬ 
keeping,  was  never  to  exceed  $10,000,000,  unless  the 
contracting  of  such  debts  was  authorized  by  Congress, 
and  in  case  of  excess  the  directors  under  whose  admin¬ 
istration  it  occurred  were  to  be  personally  liable  for  the 
amount.  The  bank  was  forbidden  to  buy  or  sell  goods 
•  except  forfeited  collateral,  under  penalty  of  forfeiting 
three  times  the  value  of  the  commodities,  one-half  of 
the  forfeit  to  go  to  the  informer,  the  other  half  to  the 
United  States.  It  might  sell  but  not  buy  United  States 
stocks  (bonds).  It  was  permitted  to  hold  only  such  real 
estate  as  was  necessary  in  the  immediate  accommodation 
of  its  banking  business  or  such  as  had  been  mortgaged 
to  it  as  security  or  conveyed  to  it  in  satisfaction  of  debts 
previously  contracted  in  the  course  of  its  dealings  or  at 
sales  upon  judgments  obtained  for  such  debts.  The 
bank  was  not  to  loan  to  the  United  States  more  than 
$100,000,  nor  to  any  State  more  than  $50,000,  nor  make 
any  loan  to  a  foreign  prince  or  State,  unless  previously 
authorized  by  act  of  Congress.  Uoans  and  discounts  were 
not  to  be  made  at  a  rate  above  6  per  cent.  The  directors 
were  permitted  to  establish  offices  for  discount  and  deposit 
only  wherever  they  should  think  fit  within  the  United 
States.  A  report  of  the  condition  of  the  bank  was  to 
be  furnished  to  the  Secretary  of  the  Treasury  at  his 
demand,  but  not  oftener  than  once  a  week,  and  that 
officer  had  the  right  to  inspect  the  books,  except  private 
accounts.  The  charter  was  to  expire  March  4,  1811, 
and  during  the  continuance  of  the  corporation  no  other 
bank  was  to  be  established  by  the  United  States.  The 


20 


First  Bank  of  the  United  States 


bank  might  begin  operations  when  $400,000  had  been 
paid  in  gold  and  silver.0 

On  March  20,  1791,  a  supplementary  bill  was  passed 
providing  that  subscriptions  should  not  be  opened  until 
the  first  Monday  in  July,  thus  affording  three  months 
longer  to  allow  citizens  in  distant  parts  of  the  country 
to  subscribe.  This  bill  also  provided  that  payments  in 
the  United  States  3  percents  might  be  subscribed  as  well 
as  the  6  percents,  computing  the  former  at  one-half  the 
latter,  and  reserving  to  subscribers  the  right  to  redeem 
the  threes  with  sixes  any  time  before  January  1,  1793; 
that  the  specie  proportion  was  to  be  paid  at  the  time  of 

subscribing,  failure  to  make  future  payments  forfeiting  the 

% 

first  payment;  and  that  no  person  or  corporation,  except 
on  behalf  of  the  United  States,  should,  for  three  months 
after  July  4,  subscribe  in  any  one  day  for  more  than 
thirty  shares. 

It  is  to  be  noted  that  the  bank  was  to  be  under  private 

management.  In  this,  as  Dunbar  points  out,  Hamilton 

followed  English  rather  than  continental  precedent. 

* 

“This  independence  of  the  Executive  he  secured  by  for¬ 
bidding  loans  of  serious  amount  for  the  use  of  the  Govern¬ 
ment,  unless  specially  authorized  by  law.”6  A  com¬ 
parison  of  the  Bank  of  England  act  of  1694  and  the  United 
States  Bank  act  of  1791  shows,  moreover,  that  a  careful 
study  had  been  made  of  the  English  institution.  The 
powers  of  the  banks,  relating  to  the  scope  of  the  business, 
were  practically  identical.  “In  each  the  redemption  of 
notes  in  specie  was  required,  and  the  amount  of  the  issue 

0  For  full  text  of  the  bank  bill,  see  Appendix  A. 
b  Economic  Essays,  p.  9 1 . 


21 


N  a  tional  Monetary  Commission 


was  limited  in  the  charter  of  the  Bank  of  England  by  for¬ 
bidding  debts  in  excess  of  the  capital,  and  in  the  charter 
of  the  Bank  of  the  United  States  by  forbidding  the  debts 
exclusive  of  deposits  to  exceed  the  capital.  ”a 

Subscriptions  for  Stock. 

Under  date  of  May  3,  1791,  the  commissioners  appointed 
to  receive  subscriptions  gave  notice  in  the  newspapers 
that  the  books  would  be  opened  for  that  purpose  at  the 
Bank  of  North  America,  in  Philadelphia,  July  4. h  The 
commissioners  included  some  of  Philadelphia’s  leading 
business  men — Thomas  Willing,  Beale  Bordley,  David 
Rittenhouse,  Samuel  Howell,  and  Lambert  Cadwalader. 
Active  interest  in  subscriptions  to  the  stock  developed 
at  once  all  over  the  country,  but  especially  in  New  York 
and  Boston.  In  the  latter  city  the  Bank  of  Massachu¬ 
setts  received  subscriptions,  and  in  New  York  the  Bank 
of  New  York  had  to  refuse  many  who  wanted  to  sub¬ 
scribe.  In  Boston  it  was  said  that  subscriptions  for 
2,400  shares  were  filled  in  four  days,  and  a  specie  deposit 
of  $60,000  was  paid  into  the  Bank  of  Massachusetts.0 
Similar  interest  was  shown  in  Baltimore,  Richmond,  and 
Charleston.  In  Charleston  the  Chamber  of  Commerce 
instituted  steps  to  secure  a  branch  of  the  bank  in  that 
city,  and  resolutions  were  adopted  inviting  the  people 
of  South  Carolina,  by  public  advertisements,  to  sub¬ 
scribe  for  stock.  Under  date  of  June  2,  1791,  certain 
public-spirited  citizens  of  Charleston  announced  in  the 
papers  that  they  would  receive  and  transmit  subscriptions 

0  Economic  Essays,  p.  92. 

&  General  Advertiser,  May  13,  1791. 

c  Dunlap’s  American  Daily  Advertiser,  June  30,  1791. 


22 


First  Bank  of  the  United  States 


and  urged  haste,  saying  that  in  the  North  subscriptions 
were  pouring  in  so  fast  that  Charleston  might  be  left 
out  unless  they  subscribed  at  once.  They  estimated 
that  annual  profits  on  the  stock  would  amount  to  8  or 
io  per  cent.  At  the  end  of  June  it  was  reported  that 
South  Carolina  had  already  subscribed  1,000  shares  and 
that  a  part  of  the  specie  deposit  had  been  deposited  in 
the  Bank  of  North  America.®  Commenting  upon  this 
interest  in  the  new  bank,  the  Daily  Advertiser  said: 
“The  Bank  of  the  United  States  may  justly  be  con¬ 
sidered  as  a  proposition  made  to  the  moneyed  interest, 
foreign  and  domestic,  and  in  fact  appears  to  both  in 
a  very  favorable  point  of  light — the  latter,  from  every 
information,  are  making  great  preparations  to  subscribe, 
and  the  terms  are  so  advantageous  that  no  equal  object 
of  speculation  is  perhaps  presented  in  any  quarter  of 
the  globe  to  the  former.”* 6  Subscriptions  continued  to 
pour  in  from  all  quarters.  A  long  debate  in  the  Massa¬ 
chusetts  legislature  on  the  proposal  to  subscribe  for  400 
shares  was  defeated.  The  Bank  of  North  America,  the 
only  bank  in  Philadelphia  at  that  time,  might  naturally 
have  resented  the  intrusion  of  this  new  giant  in  the  local 
banking  field,  over  which  for  years  it  had  held  undisputed 
sway,  and  by  some  it  was  thought  that  “the  jealousy 
and  rivalry  drawn  from  the  existence  of  the  Bank  of 
North  America”  might  prevent  the  moneyed  men  of 
Philadelphia  from  participating  to  their  proportionate 
quota  in  the  subscriptions  to  the  new  concern.0  Later 

a  Dunlap’s  American  Daily  Advertiser,  June  9,  24,  1791. 

6  Ibid.,  May  9,  1791. 

c  General  Advertiser,  June  24,  1791. 


23 


Na  t  ion  al  M  o  n  et  a  r  y  Commission 


developments,  however,  disclosed  the  fact  that  Phila¬ 
delphians  were  as  eager  to  participate  in  the  benefits 
and  profits  of  the  new  bank  as  were  the  people  of  any 
other  section,  while  the  Bank  of  North  America  evinced 
a  lively  interest  in  the  welfare  of  the  new  institution, 
with  which  it  worked  harmoniously  from  the  outset. 

On  July  4  the  subscription  books  were  opened  in 
Philadelphia,  and  within  two  hours  the  entire  capital 
of  25,000  shares  was  subscribed  and  application  was 
L  made  for  4,000  additional  shares.®  The  commissioners, 
accordingly,  were  compelled  to  deduct  a  certain  propor¬ 
tion  from  every  subscription.  In  some  quarters  there 
was  “lament  that  Philadelphians  have  engrossed  so 
much  of  the  stock  and  have  so  divided  the  shares  as 
to  multiply  their  notes.  They  believe  that  there  was 
management  and  partiality  in  the  commissioners.”6 
Immediately  a  violent  speculation  sprang  up  in  bank 
stock  or  “script,”  as  it  was  called.  Two  days  after 
the  subscription  books  were  closed  $35  was  paid  for  a 
right  to  the  certificate  which  the  commissioners  were 
to  deliver,  acknowledging  receipt  of  the  first  cash  pay- 
f  ment  of  $25,  and  within  a  week  sales  were  made  at 
$50. c  Brokers’  offices  sprang  up  on  all  sides  advertising 

■ 

the  purchase  and  sale  of  bank  script.  The  New  York 
Daily  Advertiser,  in  warning  the  public  against  specu¬ 
lators,  notes  that  the  stock  under  speculative  manipula¬ 
tion  rose  in  August,  1791,  to  56,  then  dropped  to  45, 
“from  45  to  60,  from  60  to  100  in  two  days,  from  100 

to  150  was  the  leap  in  a  single  day.”  It  was  claimed 

- — — — _ _ _ _ • _ _ _ 

a  Gibbs,  Administrations  of  Washington  and  Adams,  Vol.  I,  p.  68. 

&  Fisher  Ames  to  Hamilton,  July  31,  1791,  Works,  Vol.  V,  p.  473. 

c  General  Advertiser,  July  6,  8,  1791. 


24 


First  Bank  of  the  United  States 


that  the  interests  of  agriculture,  commerce,  and  manu¬ 
factures  suffered  by  the  withdrawal  of  considerable  sums 
of  specie  with  which  to  speculate  in  bank  script. 

Organization. 


The  work  of  organization  proceeded  very  slowly,  and 
it  was  not  until  October  7  that  a  meeting  of  the  Phila¬ 
delphia  stockholders  was  called  to  select  a  committee 
to  meet  like  committees  of  other  States  to  propose 
names  of  directors.0 

On  October  21  a  general  meeting  of  the  stockholders 
was  held  in  the  city  hall,  Philadelphia,  and  25  directors 
were  chosen.  Ten  of  the  directors  received  2,936  votes 
each,  and  the  lowest  vote  cast  for  any  director  was  2,920.° 
The  directors  met  October  25  to  select  the  officers  of 
the  bank.  The  presidency  was  offered  to  Oliver  Wolcott^ 
at  that  time  serving  as  Comptroller  of  the  Currency 
under  Hamilton,  but  he  declined  it,  “preferring  the  public 
service,  and  believing  that  such  a  station  would  be  deemed 
unsuitable  for  a  young  man  without  property.” b  Thomas 
Willing,  president  of  the  Bank  of  North  America,  and 
formerly  a  business  partner  of  Robert  Morris,  was  then 
made  president,  a  position  which  he  retained  until  1808. 
Willing  was,  by  social  position,  business  talent,  and 
experience  in  public  affairs,  remarkably  well  qualified  to 
assume  the  responsible  position  of  president  of  the  most 
powerful  financial  concern  in  the  country.  He  had  wide 
business  experience  as  partner  in  the  prosperous  business 
of  Morris  &  Willing  and  as  president  of  the  Bank  of  North 


0  General  Advertiser,  October  21,  1791.  &  Gibbs,  Vol.  I,  p.  68. 


25 


National  Monetary  Commission 


America.  He  had  served  successively  as  secretary  to 
the  congress  of  delegates  at  Albany,  judge  of  the  supreme 
court  of  Pennsylvania,  mayor  of  Philadelphia,  member 
of  the  Colonial  Assembly,  president  of  the  Provincial 
Congress,  and  delegate  to  Congress  under  the  Confeder¬ 
ation.  He  thus  enjoyed  a  wide  acquaintance  with  public 
men  and  affairs.0  The  appointment  of  JVilling  as  presi¬ 
dent  did  not  meet  with  general  satisfaction.  In  Boston, 
for  example,  it  was  feared  that  he  might  be  dominated 
by  men  like  Robert  Morris,  a  powerful  influence  in^the 
affairs  of  the  Bank  of  North  America,  who  was  regarded 
in  the  East  as  a  desperate  speculator  and  as  “a  man  of 
talents  and  intrigue.  ” b 

With  the  selection  of  a  president,  the  business  of 
organization  proceeded  more  rapidly.  John  Kean  was 
appointed  cashier,  with  a  salary  of  $2,700,  and  George 
Simpson,*  first  teller  at  $1,500.  There  was  a  second 
teller  at  $1,000,  a  first  and  second  bookkeeper  at  $1,000 
and  $800,  respectively,  a  discount  clerk  at  $750,  an 
assistant  clerk  at  $600,  and  a  runner  at  $600.  Some  of 
the  papers  reported  that  President  Willing’s  salary  had 
been  fixed  at  $3,000,  but  the  General  Advertiser  denied 
this,  remarking  that  the  president’s  salary  could  not  be 
fixed  by  the  directors,  but  only  by  a  general  meeting  of 
the  stockholders.  Eater  his  salary  was  fixed  at  $3,000.° 
The  records  of  the  Bank  of  North  America  show  that,  a 
few  years  later,  the  salary  of  the  president  of  the  Bank 
of  Pennsylvania  was  $3,000,  while  the  Farmers  and 

a  Simpson,  Lives  of  Eminent  Philadelphians,  p.  960. 

&  Ames  to  Hamilton,  Works,  Vol.  V,  p.  474. 

c  Minute  book,  Bank  of  North  America. 


26 


First  Bank  of  the  United  States 


Mechanics’  and  the  Bank  of  North  America  each  paid 
$2,500  to  their  respective  presidents. 

By-Laws  and  Regulations. 

At  jl general  meeting  of  stockholders,  held  in  City  Hall, 
October  28,  1791,  a  committee  of  seven  was  appointed  to 
draft  by-laws  and  regulations  for  the  bank.  A  month 
later  the  committee  submitted  its  report.  The  by-laws 
as  adopted  provided  that  the  bank  should  be  open  every 
day  in  the  year  excepting  Sundays,  Christmas,  and  July  4. 
The  books  were  to  be  kept  in  dollars  and  cents,  and 
were  to  be  balanced  the  first  Monday  in  January  and 
July,  when  the  semiannual  dividends  were  to  be  declared 
and  published  in  four  newspapers.  The  bank  was  to  take 
charge  of  the  cash  of  all  who  cared  to  deposit  it  there, 
free  of  expense,  and  keep  it  subject  to  their  order,  paya¬ 
ble  at  sight;  also  to  receive  deposits  of  gold  ingots,  silver 
bars,  wrought  plate,  or  other  valuable  articles  of  small 
bulk.  It  was  to  receive  and  pay  all  specie  coins  accord¬ 
ing  to  the  rates  and  value  fixed  by  Congress.  Until  the 
contemplated  offices  of  discount  and  deposit  should  be 
established,  there  were  to  be  two  discount  days  each 
week,  at  which  times  a  meeting  of  the  board  of  directors 
was  to  be  assembled.  Discounts  were  to  be  made  at 
such  rates,  not  less  than  5  per  cent  or  more  than  6,  as 
the  board  should  deem  proper  “on  bills  of  exchange  that 
have  not  more  than  sixty  days  to  run,  and  with  such 
securities  and  under  such  modifications”  as  the  board 
should  deem  satisfactory  and  expedient.  The  president 
was  authorized  to  convene  the  board  on  special  occasions 
and  to  affix  the  seal  of  the  bank  to  all  conveyances  and 


27 


National  Monetary  Commission 


documents.  Ajcomrnittee  of  at  least  three  of.  the  direct¬ 
ors  was  to.be  elected  by  ballot  monthly  to  visit  and  in¬ 
ventory  the  vaults  to  see  that  the  cash  agreed  with  the 
books.  The  bank  was  to  issue  no  notes  or  bank  paper 
except  by  direction  of  the  board.  It  was  further  pro¬ 
vided  that  if  the  directors  should  declare  a  dividend  above 
what  the  profits  justified,  thus  diminishing  the  capital, 
the  assenting  directors  should  be  responsible  therefor. 
The  board  was  authorized  to  receive  the  money  sub¬ 
scribed  from  the  commissioners.  They  were  to  deter¬ 
mine  how  the  balance  of  the  stock  should  be  paid  in  and 
to  establish  forms  for  stock  transfers,  dividend  receipts, 
proxies,  notes,  etc.  They  were  to  establish  a  seal  and 
fix  the  duties  of  the  officers.  The_directors  were  empow¬ 
ered  to  make  loans  to  the  Government  or  to  any  State, 
but  the  assent  of  a  majority  was  required.  They  were 
also  empowered  to  purchase  a  lot  and  erect  a  bank  build¬ 
ing  thereon. a 

On  November  22,  1791,  the  following  bank  regulations 
were  adopted  and  published  for  the  information  of  stock¬ 
holders  and  customers:  The  bank  was  to  be  open  from 
9  to  4.  The  discount  rate,  “for  the  present,”  was  to  be 
6  per  cent.  The  charter  of  the  bank  fixed  that  as  the 
maximum  interest  rate.* 6  Bills  or  notes  offered  for  dis¬ 
count  were  to  be  delivered  at  the  bank  Mondays  and 

0  Daily  Advertiser,  November  14,  1791. 

6  Fisher  Ames  thought  that  if  the  rate  were  made  5  per  cent  the  bank 
would  do  more  business  and  with  safer  people.  By  giving  better  terms  to 
borrowers  the  bank  would  overpower  the  state  institutions,  which  he 
feared  might  become  unfriendly  and  through  hatred  and  rivalry  narrow 
the  business  of  the  United  States  Bank,  and,  perhaps,  become  dangerous 
instruments  in  the  hands  of  state  partisans. — Ames  to  Hamilton,  July  31, 
1791,  Works,  Vol.  V,  p.  474. 


28 


First  Bank  of  the  United  States 


Wednesdays  and  presented  to  the  directors  on  Tuesdays 
and  Thursdays.  The  results  of  their  action  were  to  be 

m/ 

known  on  the  next  succeeding  days — that  is,  borrowers 
submitting  paper  for  discount  were  apprised  of  the  result 
two  days  later.  After  the  bank  got  under  way,  this  rule 
was  changed  so  that  bills  and  notes  for  discount  were  pre¬ 
sented  on  Mondays  and  Thursdays.0  Discounts  were  to 
be  made  on  personal  security  only,  with  at  least  two  re° 
sponsible  names — that  is,  double-name  paper — and  were 
limited  to  sixty  days.  Three  days  of  grace  were  allowed 
on  all  bills  payable  to  the  bank,  interest  being  charged  for 
the  same.  The  bank  would  present  without  charge  bills 
or  notes  left  for  acceptance,  provided  that  in  case  of  non¬ 
payment  and  protest  the  protest  charges  should  be  paid 
by  the  person  lodging  the  bill.  Payments  made  over  the 
counters  of  the  bank  were  to  be  examined  at  the  time, 
and  no  errors  were  to  be  corrected  afterward.  The  regu¬ 
lations  also  prescribed  and  set  out  in  detail  the  forms  for 
voting  by  proxy  at  elections,  for  transferring  stock,  and 
similar  forms. b 

Paying  in  of  Capital. 

December  12,  1791,  ten  months  after  receiving  its 
charter,  the  bank  opened  for  the  regular  transaction  of 
business.  It  is  assumed  that  the  prescribed  amount  of 
specie,  $400,000,  necessary  to  begin  operations  had  been 
paid  in.  Sumner  says:  “The  belief  at  the  time,  and  sub¬ 
sequently,  wTas  that  no  more  than  the  specie  part  of  the 
first  installment  ever  was  paid  into  the  bank  in  specie.”0 

o  Daily  Advertiser,  January  3,  1792. 

&  Ibid.,  November  22,  1791. 

c  History  of  Banking  in  all  Nations,  Vol.  I,  p.  33. 


29 


Na  tional  Monetary  Commission 


Bollman,  writing  in  1810,  said:  “No  more  or  little  more 
than  the  first  installment,  $675,000,  can  be  considered  as 
having  been  received  by  the  bank  actually  in  hard 
money.”0  In  a  debate  in  the  Pennsylvania  legislature  in 
1793,  it  was  stated  that  one  great  source  of  profit  to  the 
Bank  of  the  United  States  when  it  was  first  established 
was  in  the  discounting  of  notes  for  stockholders,  to  enable 
them  to  pay  subsequent  installments.  No  one  seemed 
sufficiently  informed  or  inclined  to  defend  the  bank  from 
this  charge,  and  in  the  light  of  facts  bearing  upon  this 
dangerous  practice  in  the  organization  of  other  banks  it 
seems  probable  that  the  charge  was  not  groundless.* 6 
To  facilitate  the  payment  of  the  second  installment  of 
specie,  due  in  January,  1792,  the  bank  arranged  with  the 
Bank  of  Massachusetts  and  the  Bank  of  New  York  to  re¬ 
ceive  the  payments.  The  cashiers  of  these  banks  issued 
receipts  or  certificates  which  were  accepted  by  the  Bank 
of  the  United  States  as  evidences  of  payment.  Further, 
the  bank  encouraged  stockholders  to  prepay  the  remain¬ 
ing  installments  by  allowing  full-paid  shares  to  draw 
dividends  from  the  first  of  the  month  following  such  pay¬ 
ments.0  Arrangements  were  made  whereby  the  specie 
portion  of  the  third  installment,  due  in  July,  1792,  might 
be  made  at  the  bank  or  any  of  its  branches,  while  trans¬ 
fers  of  United  States  stocks  might  be  made  on  the  books 
of  the  Treasury  or  at  the  office  of  the  commissioners  of 
loans.  The  transfer  books  were  closed  for  two  weeks 
prior  to  dividend  days — July  1  and  January  1.  Though 
the  major  part,  probably,  of  the  shares  were  not  fully 

“Paragraphs  on  Banks,  p.  35. 

6  House  Journal  (Pa.),  1793-95,  Vol.  Ill,  p.  180. 

c  Daily  Advertiser,  March  24,  1792. 


30 


First  Bank  of  the  United  States 


paid  in  until  the  end  of  1792,  dividends  were  declared  in 
July,  1792.  Shares  completed  in  March  received  $12,  in 
April  $10.67,  and  in  May  $9.33. 

Paying  in  of  Capital  by  the  Government. 

The-4itTipQ£aL.lo  permit  the  President  to  subscribe 
$2,000,000  on  account  of  the  public  was  obviously  to 
secure  a  share  in  the  profits  of  the  bank.0  Hamilton 
explained  that  the  main  design  of  this  provision  was 
“to  enlarge  the  specie  fund  of  the  bank,  and  to  enable  it 
to  give  a  more  early  extension  to  its  operations.  Though 
it  is  proposed  to  borrow  with  one  hand  what  is  lent  with 
the  other,  yet  the  disbursement  of  what  is  borrowed  will 
be  progressive,  and  bank  notes  may  be  thrown  into  circu¬ 
lation  instead  of  the  gold  and  silver.  Besides,  there  is  to 
be  an  annual  reimbursement  of  a  part  of  the  sum  bor¬ 
rowed,  which  will  finally  operate  as  an  actual  investment 
of  so  much  specie.”  But  he  concludes  this  naive  ex¬ 
planation  with  the  statement  that  “  as  far  as  the  dividend 
on  the  stock  shall  exceed  the  interest  paid  on  the  loan, 
there  is  a  positive  profit.” 

Hamilton  deemed  it  necessary  to  make  a  special  explana¬ 
tion  and  defense  of  one  other  feature  in  his  bank  scheme — 
the  provision  that  United  States  stocks  might  be  sub¬ 
scribed  into  the  capital.  The  chief  object  of  this  was  “to 
enable  the  creation  of  a  capital  sufficiently  large  to  be  the 
basis  of  an  extensive  circulation,  and  an  adequate  security 
for  it.”  To  collect  a  specie  capital  of  $10,000,000  into  one 
depository  was  out  of  the  question;  recourse  must  be  had, 
then,  as  was  the  case  with  the  Bank  of  England,  to  basing 

°  See  p.  45. 


National  Monetary  Commission 


the  circulation  in  large  part  on  the  public  debt.  Public 
stocks  could  always  be  converted  promptly  into  coin. 
But  as  Professor  Sumner  very  properly  puts  it:  “When 
the  first  Bank  of  the  United  States  was  organized,  the 
Government  did  not  need  to  borrow  and  did  not  obtain  any 
loan  by  the  subscription  of  the  public  stock  into  the 
capital.  That  arrangement  never  had  any  proper  cause 
or  excuse,  and  only  served  to  give  occasion  for  some  clamor 
against  the  bank,  as  a  piece  of  jobbery  and  favoritism  to 
the  bondholder.’ ’a 

The  device  by  which  Hamilton  carried  through  the 
government  subscription  of  $2,000,000  and  received  a  loan 
of  a  similar  amount,  “a  simultaneous  transaction”  which 
did  not  involve  the  payment  of  a  single  dollar  in  money, 
was  an  ingenious  example  of  financial  juggling.  For  the 
Government  to  pay  for  its  stock  by  actually  drawing 
money  from  Europe,  and  then  to  remit  back  to  Europe 
out  of  the  loan  to  be  obtained  from  the  bank,  would  be  at 
once  useless  and  disadvantageous.  This  would  involve 
a  loss  on  exchange  in  consequence  of  overstocking  the 
market  with  foreign  bills  and  a  loss  in  interest  while  the 
transaction  was  being  carried  through.  Accordingly, 
upon  Hamilton’s  suggestion,  the  following  “merely  formal 
arrangement  ”  was  adopted.  The  United  States  Treasurer 
drew  bills  on  the  American  commissioners  in  Amsterdam 
for  the  amount  of  the  subscription.  These  bills  were 
bought  by  the  bank,  and  warrants  on  the  bank  in  favor  of 
the  Treasurer  placed  the  proceeds  in  the  Treasury.  War¬ 
rants  were  then  issued  on  the  Treasury  in  favor  of  the  bank 

0  History  of  Banking  in  all  Nations,  Vol.  I,  p.  32. 


32 


First  Bank  of  the  United  States 


and  the  amount  of  the  subscription  was  receipted  for  as 
paid.  Simultaneously  with  this  transaction,  the  bank 
loaned  $2,000,000  to  the  Government,  which  sum  was 
paid  by  the  redelivery  of  the  Amsterdam  bills.  Finally 
warrants  were  drawn  upon  the  Treasurer  to  replace  the 
money  supposed  by  this  arrangement  to  be  drawn  from 
the  foreign  fund.  The  bills  were  canceled,  attached  to 
the  warrants,  and  held  in  the  Treasury  as  vouchers  of  the 
transaction.®  Shorn  of  technicalities,  the  Government 
paid  for  its  stock  in  bills  of  exchange  on  Amsterdam,  then 
it  borrowed  these  bills  and  gave  its  note  for  $2,000,000, 
payable  in  ten  equal  annual  installments  of  $200,000  each, 
with  interest  at  6  per  cent.  The  practice  thus  instituted 
by  the  Government  itself  of  paying  subscriptions  with 
stock  notes  was  followed  widely  and,  in  numerous  instances, 
with  disastrous  effects,  in  the  next  fifty  years. b 

It  will  be  fitting  here  to  trace  how  the  Government  met 
its  subscription  obligations  to  the  bank.  The  first 
installment  was  due  January  1,  1793.  In  the  preceding 
November  Hamilton  brought  the  matter  to  the  attention 
of  the  House,  but  that  body  made  no  provision  for  paying 
it;  so  Hamilton  left  a  deposit  of  $200,000  with  the  bank 
as  an  offset  until  legislative  provision  should  be  made. 
This  had  the  effect  of  suspending  interest  on  the  install¬ 
ment.  On  March  2,  1793,  Congress  authorized  payment 
out  of  the  proceeds  of  foreign  loans.  The  Attorney  - 
General  decided,  however,  that  under  the  legal  construc¬ 
tion  of  the  contract  the  foreign  fund  could  not  be  applied 
in  that  way  until  June  25.  Not  until  July  20 — a  delay  of 

a  American  State  Papers,  Finance  Folio,  Vol.  I,  p.  91. 

b  Sumner,  History  of  Banking  in  all  Nations,  Vol.  I,  p.  32. 


7069 — ia 


3 


33 


National  Monetary  Commission 


more  than  six  months — was  the  first  installment  actually 

\ 

paid.  A  similar  delay  occurred  in  paying  the  second 
installment.  Congress  was  even  more  tardy  in  acting, 
for  it  was  not  until  July  4,  1794,  that  payment  was  author¬ 
ized.  Hamilton  advised  the  bank  that  as  an  offset  he 
would  defer  calling  the  last  installment  of  the  $800,000 
loan  which  the  bank  had  made  to  the  Government.  This 
arrangement  favored  the  Treasury,  for  it  arrested  interest 
at  6  per  cent  on  the  sum  due  the  bank  with  a  fund  obtained 
from  the  bank  itself  bearing  only  5  per  cent.a  The  fore¬ 
going  transactions  established  the  principle  of  paying  the 
installments  on  the  last  day  of  the  year.  Congress  pro¬ 
vided  for  the  payment  of  the  next  installment,  due  at  the 
end  of  1794.  The  next  two  payments  were  not  made 
until  January,  1797,  when  2,160  shares  of  the  Govern¬ 
ment’s  stock  were  sold  at  $500  (a  premium  of  25  per  cent) 
and  $400,000  was  applied  in  paying  the  fourth  and  fifth 
installments.  The  other  five  installments  were  paid  more 
promptly. 

Election  of  Directors. 

The  bank  had  been  open  only  about  two  weeks  when 
the  time  came  for  the  election  of  directors,  of  whom  only 
three-fourths  were  eligible  for  reelection.  Of  the  25 
chosen,  11  were  from  Pennsylvania,  6  from  New  York,  3 
from  Massachusetts,  and  1  each  from  Maryland,  South 
Carolina,  North  Carolina,  Connecticut,  and  Virginia.6 
In  the  list  were  several  recognized  leaders  of  the  Federalist 
party  and  several  of  them  were  members  of  Congress.  It 

a  Finance,  Vol.  I,  p  278. 
b  General  Advertiser,  January  5,  1792. 


34 


First  Bank  of  the  United  States 


was  but  natural  that  the  directors  of  the  bank,  chartered 
by  a  Federalist  Congress,  should  be  largely  of  that  party, 
yet  this  fact  gave  the  Republicans  and  opponents  of  the 
bank  a  basis  for  criticism  and  opposition  which  was  never 
in  the  twenty  years  of  its  existence  wholly  silenced.  In 
the  next  annual  election  of  directors,  January  5,  1793, 
only  10  Pennsylvanians  were  elected  to  the  directorate, 
and  15  from  other  States.  This  would  indicate  that  more 
than  a  majority  of  the  stock  was  held  out  of  the  home 
State.  The  Philadelphia  stockholders  apparently  were 
slow  in  nominating  their  quota  of  directors,  so  the  out¬ 
siders  named  10,  of  whom  2  were  not  included  in  the  ticket 
of  12  which  a  few  of  the  stockholders  in  the  city  had  got 
together  at  short  notice.  In  a  letter  to  the  General 
Advertiser  a  disgruntled  stockholder  urged  that  non¬ 
resident  directors  could  not  serve  the  interests  of  the  bank 
so  effectively,  since  “  they  do  not  visit  the  bank  more  than 
once  or  twice  in  the  course  of  twelve  months,  and  then 
only  for  a  few  days  when  their  private  business  calls  them 
to  this  city.”0 

For  the  first  few  years  the  Bank  of  the  United  States 
occupied  Carpenters’  Hall  on  Chestnut  street  between 
Third  and  Fourth.*  6  In  1 797  a  superb  building  was  erected 
for  its  accommodation  on  Third  street  between  Chestnut 
and  Walnut,  after  plans  drawn  by  Samuel  Blodget.c 
Under  date  of  December  3,  1791,  the  cashier,  John  Kean, 
gave  notice  in  the  newspapers  that  the  bank  would  open 
on  Monday,  December  5,  and  that  it  would  begin  to 

0  February  5,  1793. 

&  Philadelphia  Directory,  1793. 

c  Blodget’s  Economica,  p.  165.  This  site  is  now  occupied  by  the  Girard 
National  Bank. 


35 


National  Monetary  Commission 


receive  deposits  the  following  Monday,  December  12. 
The  intervening  week  was  occupied  in  making  transfers 
of  stock  and  with  matters  of  routine  incident  to  the  com¬ 
mencement  of  actual  business. 

Branches. 

Hamilton’s  original  plan  of  the  bank  did  not  contem¬ 
plate  the  establishment  of  branches,  and  the  clause  pro¬ 
viding  for  them  was  inserted  against  his  judgment.®  In 
his  report  to  Congress  on  the  national  bank  he  admits 
that  there  might  be  some  advantages  in  the  branch  plan. 
It  would  afford  more  general  accommodation,  and  would 
lessen  the  danger  of  a  run  on  the  bank.  But,  on  the  other 
hand,  the  mismanagement  of  any  branch,  which,  though 
under  subordinate  direction,  must  necessarily  be  intrusted 
with  considerable  discretion,  might  endanger  the  interests 
of  the  whole  system.  Because  of  the  complexity  and 
uncertainty  of  the  branch  scheme,  therefore,  he  thought 
it  well  to  go  no  further  than  to  insert  a  provision  by  which 
branches  might  be  established  some  time  in  the  future 
if  experience  demonstrated  their  utility  and  safety. 
There  was  much  difference  of  opinion  on  this  subject. 
Wolcott,  who  was  consulted,  favored  the  branch  plan,  and, 
“a  majority  of  the  stockholders  assenting,  it  was  adopted 
on  a  plan  suggested  by  him.”6 

The  directors  decided  to  open  branches  at  New  York, 
Boston,  Baltimore,  and  Charleston  as  soon  as  possible 
after  the  first  Monday  in  January,  1792.  The  plan  pro¬ 
vided  that  the  directors  of  the  parent  bank  should  appoint 

a  Hamilton  to  William  Seton,  November  25,  1791,  Works,  Vol.  V,  p.  486. 

b  Gibbs,  Vol.  I,  p.  67. 


36 


First  Bank  of  the  United  States 


annually  not  less  than  nine  directors  for  each  branch,  a 
majority  to  constitute  a  board.  Not  more  than  three- 
fourths  of  them,  exclusive  of  the  president,  were  to  be 
eligible  for  the  next  year.  The  directors  of  the  main  bank 
appointed  the  cashiers  of  the  several  branches;  the  direc¬ 
tors  of  the  branches  appointed  their  own  president, 
tellers,  and  clerks,  but  the  sureties  of  the  latter  were  sub¬ 
ject  to  the  approval  of  the  directors  of  the  Bank  of  the 
United  States.  The  salaries  of  all  the  branch  officers 
and  clerks  were  fixed  by  the  directors  of  the  parent  bank, 
who  also  prescribed  the  method  of  keeping  the  accounts 
and  records.  It  was  provided  that  the  part  of  the  capital 
which  consisted  of  United  States  stock  (bonds)  should  not 
be  divided,  but  the  branches  could  discount  upon  such 
part  of  the  specie  capital  as  the  directors  should  apportion 
to  them,  and  “with  such  part  of  the  deposits  as  shall  be 
lodged  with  them”  as  the  branch  directors  should  deem 
safe  and  expedient.  All  the  notes  issued  at  the  branches 
were  to  be  signed  and  countersigned  by  the  president  and 
cashier  of  the  parent  bank,* to  be  payable  at  the  branch 
issuing  them,  and  to  be  delivered  to  the  cashier  of  the 
branch,  who  was  required  to  give  duplicate  receipts  for 
them,  one  to  be  lodged  with  the  president  of  the  parent 
bank,  the  other  with  the  president  of  the  branch.  All 
notes  unfit  for  circulation  were  to  be  canceled  by  the 
president  and  directors  of  the  branch,  and  immediately 
transmitted  to  the  directors  of  the  main  bank,  where  they 
were  to  be  credited  to  the  branch.  Each  branch  was 
required  to  send  to  the  mother  bank  a  weekly  statement 
of  condition — debits  and  credits,  notes  issued,  and  cash  on 


37 


National  Monetary  Commission 


hand,  distinguishing  specie  and  the  several  kind  of  bank 
notes.  The  continuance  of  the  branches  was  to  be  at  the 
pleasure  of  the  directors  of  the  main  bank,  but  none  of 
the  foregoing  regulations  was  to  be  rescinded  except  at  a 

meeting  of  a  majority  of  the  directors.0 

** 

At  a  meeting  of  the  directors  January  12,  1792,  13 
directors  were  elected  for  each  of  the  branches  at  New 
York,  Boston,  and  Charleston,  and  a  month  later  a  like 
number  were  chosen  for  the  Baltimore  branch. b  Within 
a  short  time  other  branches  were  opened  at  Norfolk  (1799) , 
Savannah,  and  Washington,  and  in  1804  a  branch  was 
established  at  New  Orleans,  making  in  all  eight  branches. 
Contrary  to  the  original  arrangement,  under  which  that 
part  of  the  capital  which  consisted  of  United  States  bonds 
was  not  to  be  divided,  each  branch  was  apportioned  a  share 
of  the  whole  capital.  The  capital  reserved  for  the  parent 
bank  at  Philadelphia  was  $4,700,000,  the  balance  being  dis¬ 
tributed  among  the  several  branches  as  follows:  New  York, 
$1,800,000;  Boston,  $700,000;  Baltimore,  $600,000;  Nor¬ 
folk,  $600,000;  Charleston,  $600,000;  Savannah,  $500,000; 
New  Orleans,  $300,000;  and  Washington,  $200,000. c 
This  distribution  gave  the  eight  branches  a  total  capital 
of  $5,300,000,  a  trifle  more  than  the  amount  allotted  to 
the  main  bank.  In  1792,  when  these  branches  went  into 
operation,  Boston  had  one  bank,  the  Bank  of  Massachu¬ 
setts,  established  in  1784;  Baltimore  had  one,  the  Maryland 
Bank,  chartered  in  1790;  Philadelphia  had  the  Bank  of 
North  America,  founded  in  1781;  and  New  York  had  the 

a  Daily  Advertiser,  November  18,  1791. 

6  Pennsylvania  Journal,  January  25,  February  15,  1792. 

c  Finance,  Vol.  II,  p.  479. 


38 


First  Bank  of  the  United  States 


Bank  of  New  York,  which  began  business  in  1784,  but 
which  did  not  secure  a  charter  until  1791.  The  other 
banks  in  the  country  at  that  time  were  the  Bank  of  Provi¬ 
dence,  established  in  1791,  the  Bank  of  Albany,  the 
unchartered  Bank  of  South  Carolina,  the  Union  Bank  of 
Boston,  and  the  Hartford  Bank,  all  founded  in  1792.0 

It  has  already  been  noted  that  Hamilton  did  not  favor 
the  establishment  of  branches.  Writing  to  his  friend, 
William  Seton,  cashier  of  the  Bank  of  New  York,  Novem¬ 
ber  25,  1791,  Hamilton  says:  “Strange  as  it  may  appear 
to  you,  it  is  not  more  strange  than  true  that  the  whole 
affair  of  branches  was  begun,  continued,  and  ended,  not 
only  without  my  participation,  but  against  my  judg¬ 
ment.”  b  He  naturally  had  a  deep  interest  in  the  Bank  of 
New  York,  and  Professor  Sumner  suggests  that  one  reason 
for  his  opposition  to  the  establishment  of  branches  was 
that  he  foresaw  a  collision  of  interests.0  Apparently  he 
had  hoped  to  make  the  Bank  of  New  York  the  exclusive 
fiscal  agent  of  the  Government  in  that  city. 

In  a  letter  to  Seton,  January  24,  1792,  he  stated  his 
wish  that  the  Bank  of  New  York  should  continue  to 
receive  deposits  from  the  collector  and  payment  for 
the  Dutch  bills  in  the  paper  of  the  Bank  of  the  United 
States.  He  had  explicitly  directed  the  treasurer  not 
to  draw  upon  the  New  York  institution  without  special 
direction  from  himself.  It  was  his  intention  to  leave  it 
in  undisturbed  possession  of  whatever  government  funds 
it  might  have  until  the  commercial  crisis  impending 

“Gouge,  Journal  of  Banking,  p.  240. 

b  Works,  Vol.  V,  p.  486. 

c  History  of  Banking  in  all  Nations,  Vol.  I,  p.  33. 


.  39 


National  Monetary  Commission 


at  that  time  should  subside.  Hamilton  even  com¬ 
mended  the  action  of  the  Bank  of  New  York  in  refusing 
to  receive  the  paper  of  the  Bank  of  the  United  States 
during  the  crisis,  and  assured  Seton  that,  if  pressed,  his 
bank  should  receive  whatever  support  the  Secretary 
could  render.  He  wrote:  “I  consider  the  public  interest 
as  materially  involved  in  aiding  a  valuable  institution  like 
yours  to  withstand  the  attacks  of  a  confederated  host 
of  frantic  and,  I  fear  in  too  many  instances,  unprincipled 
gamblers.”0 

Hamilton  recognized,  however,  that  the  establishment 
of  a  branch  of  the  Bank  of  the  United  States  in  New 
York  would  ultimately  make  it  incumbent  upon  him 
to  deposit  the  public  funds  in  the  branch  rather  than 
with  the  Bank  of  New  York.  He  assured  Seton,  how¬ 
ever,  that  he  would  precipitate  nothing,  but  would  effect 
the  transfer  so  as  not  to  embarrass  or  disturb  his  bank. 
Realizing  that  the  branch  must  preponderate,  he  advised 
Seton  to  cast  his  lot  with  it. 6  Experience  demonstrated 
the  safety  and  wisdom  of  the  branch  system,  and  in  time 
Hamilton’s  doubts  were  dispelled.  In  1794  we  find  him 
urging  the  bank  to  open  a  branch  at  Alexandria,  Va. c 

Relation  to  State  Banks. 

V 

From  the  outset  the  United  States  Bank  entered  into 
friendly  cooperation  with  the  State  banks.  Early  in  the 
year  1792  the  directors  appointed  a  committee  to  con¬ 
fer  with  a  similar  committee  of  the  Bank  of  North  America 
once  a  week,  “for  the  purpose  of  communicating  freely 
upon  the  business  of  both,  as  well  to  prevent  improper 

“Works,  Vol.  V,  p.  492.  bibid.,  p.  486.  clbid.,  p.  76. 


40 


First  Bank  of  the  United  States 

interference  with  each  other  as  to  promote  the  accom¬ 
modation  of  the  citizens.”0  The  two  banks  made  set¬ 
tlements  and  exchanged  notes  daily,  and  when  the 
Bank  of  Pennsylvania  was  established  in  1793  it  was 
included  in  this  arrangement.  Some  years  later  the 
three  banks  went  still  further  and  adopted  uniform  rules 
regarding  discounts  and  other  matters  of  routine.  At  a 
joint  committee  meeting  held  March  2,  1797,  the  rule 
was  adopted  that  “after  March  31  all  bills  made  payable 
at  sight  or  on  demand  must  be  paid  on  the  same  day 
they  are  presented.”  It  was  also  agreed  not  to  dis¬ 
count  any  note  in  which  the  words  “without  defalca¬ 
tion”  or  “without  set-off”  were  omitted.6  Again,  dur¬ 
ing  the  hard  times  that  followed  the  devastations  of 
the  yellow  fever  we  find  committees  from  the  three  banks 
conferring  on  “the  prevailing  distress  of  the  mercantile 
interests  of  this  city.”c 

Similar  cooperation  existed  at  first  between  the  New 
York  branch  and  the  Bank  of  New  York.  When  financial 
stringency  threatened,  however,  each  bank  looked  to  its 
own  interests.  In  1796  Europe  experienced  a  severe 
financial  crisis,  which  caused  the  Bank  of  England  to 
suspend  specie  payments,  and  its  effects  were  felt  in  this 
country.  The  Bank  of  New  York,  partly  because  of 
heavy  loans  to  the  Government,  and  partly  because  of 
an  overextension  of  credit,  became  a  heavy  debtor  to 
the  Bank  of  the  United  States.  The  New  York  branch 
demanded  the  payment  of  $100,000  in  specie  on  account, 

“Directors’  Minute  Book,  Bank  of  North  America,  March  22,  1792. 

bibid.,  March  2,  1797. 

clbid.,  May  16,  1799. 


is" 


4i 


Na  t  i  o  n  a  l  M  o  n  e  t  a  r  y  Commission 


which,  it  was  apprehended,  would  be  followed  by  further 
demands.  It  was  feared  that  the  Bank  of  New  York 
would  be  compelled  to  sell  the  public  stock  which^t  held 
as  collateral,  if  the  Government  should  not  be  punctual. 
Hamilton  wrote  to  Wolcott,  December  6,  1796,  asking 
him  to  come  to  the  aid  of  the  Bank  of  New  York.  “It 
would  be  wise,”  he  writes,  “if  possible,  to  anticipate  a 
particular  payment.  It  will  be  also  useful  to  arrest  for 
a  time  too  free  calls  from  the  office.  ”“  Wolcott  replied, 
December  8,  that  the  Bank  of  New  York  might  rest 
assured  of  as  full  and  cordial  assistance  from  him  as  was 
in  his  power.  He  thought,  however,  that  they  would 
have  to  rely  upon  sales  of  stock,  principally,  as  it  was 
impracticable  in  the  existing  state  of  the  Treasury  to 
anticipate  payments.  In  this  same  letter,  Wolcott  says: 
“These  institutions  have  all  been  mismanaged;  I  look 
upon  them  with  terror.  They  are  at  present  the  curse, 
and  I  fear  they  will  prove  the  ruin,  of  the  Government. 
Immense  operations  depend  upon  a  trifling  capital 
fluctuating  between  the  coffers  of  the  different  banks.”6 

The  bank  undoubtedly  had  an  influence  in  restricting 
the  circulation  of  state  banks.  This  was  admitted  by 
these  institutions,  and  by  many  of  them  regarded  as  a 
benefit. 


Loans  to  the  Government. 

The  first  loan  which  the  bank  made  to  the  Government 
in  connection  with  the  subscription  of  capital  has  already 
been  referred  to.  Under  the  terms  of  the  charter  the 
bank  loaned  the  United  States  $2,000,000  at  6  per  cent, 

a  Works,  Vol.  VI,  p.  184.  b  Ibid.,  p.  176. 


42 


Fi  rst  Bank  of  the  United  States 

_  -  ; 

reimbursable  in  io  equal  annual  installments  or  in  any 

greater  proportions  that  the  Government  might  think 
fit.  The  interest  on  $1,000,000  of  the  loan  commenced 
December  20,  1791,  at  which  time  the  dividends  on  the 
stock  began  to  accrue.  On  the  other  $1,000,000  interest 
commenced  July  1,  1792.  Toward  the  close  of  the  year 
1792  Congress  asked  Hamilton  to  submit  a  plan  to  reim¬ 
burse  the  loan  to  the  bank.  He  proposed  to  borrow  the 
money.  He  thought  a  loan  could  be  floated  in  Holland, 
which,  based  upon  the  rates  of  earlier  foreign  loans,  would 
effect  a  net  saving  to  the  Government  of  $35,000  a  year — 
the  difference  between  the  interest  on  the  proposed  foreign 
loan  and  that  on  the  bank  loan.  But  the  dividends  on 
the  bank  stock  were  8  per  cent,  while  the  interest  on 
the  loan  was  only  6,  and  with  this  profit  Congress  seemed 
satisfied.®  The  Government,  however,  was  not  content 
with  this.  It  was  without  funds  at  the  outset,  and 
though  Hamilton  early  worked  out  a  scheme  to  supply 
it  with  revenue,  the  money  flowed  into  the  Treasury 
but  slowly,  while  obligations  had  to  be  paid  when  due. 
Recourse  was  had  to  temporary  loans,  which  were  secured 
from  the  bank.  Unexpected  exigencies  required  the 
expenditure  of  considerable  sums  before  there  was  time 
to  raise  them  by  the  normal  method  of  additional  taxes. 
These  loans,  therefore,  were  larger  and  continued  for  a 
longer  time  than  was  at  first  expected,  causing  embarrass¬ 
ment  to  the  Treasury  and  uneasiness  to  the  bank  before 
they  were  finally  settled. 

In  May,  1792,  the  Government  needed  money  to  meet 
the  expenses  of  one  of  its  Indian  wars,  and  Hamilton 

a  Finance,  Vol.  I,  p*.  178. 


43 


National  Monetary  Commission 


contracted  with  the  bank  for  a  loan  of  $400,000  at  5  per 
cent.0  In  1794  Congress  authorized  a  loan  of  $1,000,000, 
and  Wolcott,  who  had  succeeded  Hamilton  as  Secretary 
of  the  Treasury,  entered  into  negotiations  with  the  Bank 
of  the  United  States,  which,  fettered  by  its  previous  loans, 
could  not  advance  the  money.  The  bank,  however, 
offered  to  lend  $800,000  in  Government  6  per  cents,  if  cer¬ 
tain  duties  were  pledged  for  payment.  Another  loan  of 
$1 ,000,000  was  made  by  the  bank  at  the  same  time. 6 

The  difficulties  of  the  Government  increased  with  both 
England  and  France,  and  more  money  was  needed  to  pre¬ 
pare  for  hostilities.  In  December,  1794,  another  loan  of 
$2,000,000  at  5  per  cent  was  authorized^  In  the  follow¬ 
ing  February  a  loan  of  $800,000  was  authorized  to  reim¬ 
burse  the  bank  for  that  amount  borrowed  the  previous 
year.  On  March  3,  1795,  Congress  authorized  still  an¬ 
other  loan  of  $1,000,000.  The  bank  advanced  one-half  of 
this  March  24,  and  the  balance  September  30,  at  6  per 
cent.  Again  on  December  31,  1795,  the  bank  advanced 
$500,000  at  6  per  cent  for  payment  of  interest  on  the 
public  debt.  Three  years  then  elapsed  without  further 
loans  from  the  bank.  On  January  1,  1799,  Wolcott  se¬ 
cured  another  loan  of  $200,000  at  6  per  cent,  payable  Jan¬ 
uary  1,  1803. 

Thus  it  appears  that  the  Bank  of  the  United  States 
accommodated  the  Government  whenever  called  upon 
and  continued  the  loans  to  suit  its  convenience.  At  the 
end  of  its  first  year  the  bank  had  loaned  the  Government 

a  Act  May  2,  1792,  2d  Cong.,  1st  sess.,  ch.  27,  sec.  16. 

&Act  March  20,  1794,  3d  Cong.,  1st  sess.,  ch.  8. 

c  Finance,  Vol.  I,  p.  630. 


44 


First  Bank  of  the  United  States 


over  $2,500,000;  by  January  31,  1795,  when  Hamilton 
resigned,  the  total  loan  amounted  to  $4,700,000.  This 
indebtedness  increased  under  his  successor,  Wolcott,  until 
it  finally  amounted  to  $6,200,000  at  the  close  of  the  year 
1795.®  Within  four  years  the  Government  had  borrowed 
nearly  two-thirds  of  the  entire  capital  of  the  bank.  The 
bank  naturally  became  restive  and  impatient;  the  loan  of 
so  large  a  proportion  of  its  funds  crippled  its  services  to 
commerce  and  manufactures  and  made  it  difficult  to 
“facilitate  the  financial  operations  of  the  Government  by 
temporary  loans.”  Wolcott  proposed  to  commute  the 
whole  debt  due  to  the  bank  into  a  funded  stock  a  6  per 
cent,  and  irredeemable  for  such  a  period  as  would  invite 
purchases  at  par.  He  argued  that  inasmuch  as  this  debt 
was  contracted  in  exchange  for  an  equal  sum  of  the  cap¬ 
ital  stock  or  consisted  of  sums  advanced  for  the  public 
service  in  anticipation  of  revenue,  it  might  fairly  be  con¬ 
sidered  as  first  in  merit  and  importance.  Moreover,  the 
proposed  commutation  would  enable  the  bank  to  grant 
further  loans  as  public  exigencies  should  require  without 
exposing  the  Government  to  certain  expenses  always  at¬ 
tending  loans  from  individuals.  Then,  again,  sales  of 
stock  could  be  made  to  the  best  advantage  through  the 
agency  of  the  bank,  and  any  premium  would  inure  to  the 
advantage  of  the  Government.*  6 

In  March,  1796,  the  Ways  and  Means  Committee,  act¬ 
ing  upon  Wolcott’s  proposal,  recommended  a  loan  of 
$5,000,000  to  discharge  the  debt  to  the  bank.  But  in 
May,  William  Smith,  the  chairman  of  the  committee,  was 

a  Gibbs,  Vol.  I,  pp.  187,  288. 

&  Statement  of  Public  Debt,  December  31,  1795,  Finance,  Vol.  I,  p.372. 


45 


Na  tional  Monetary  Commission 


delegated  to  inquire  whether  the  bank  might  be  willing 
to  continue  the  loans  of  the  Government  by  new  loans  on 
terms  similar  to  the  old  ones.®  The  bank,  however,  was 
not  disposed  to  permit  even  so  powerful  a  customer  as 
the  United  States  to  continue  to  monopolize  its  funds. 
There  had  been  a  great  increase  in  the  price  of  all  kinds 
of  property,  which  required  a  corresponding  increase  of 
circulating  medium  to  represent  it.  The  bank  needed 
more  available  funds  to  serve  more  generally  the  interests 
of  commercial  and  manufacturing  customers,  and  also  to 
be  in  a  position  to  aid  the  Government  by  temporary 
loans.  The  active  employment  of  a  larger  specie  capital 
would  also  be  to  the  immediate  advantage  of  stockholders 
and  customers.  While  serving  as  president  of  the  Bank 
of  North  America,  Willing  had  seen  that  institution  crip¬ 
pled  by  large  loans  to  a  few  powerful  customers,  who  met 
their  maturing  obligations  by  renewal  upon  renewal,  and 
he  seems  now  determined  that  the  Bank  of  the  United 
States  shall  not  be  subjected  to  the  same  experience, 
through  monopolization  by  the  Government.  He,  there¬ 
fore,  requested  that  the  United  States  should  extinguish 
the  loans  already  due,  as  well  as  provide  for  those  matur¬ 
ing  during  the  year  1 796. 

When  the  bank  took  this  firm  stand  a  bill  was  intro¬ 
duced  into  the  House  authorizing  the  commissioners  of 
the  sinking  fund  to  issue  $5,000,000  of  6  per  cent  stock, 
the  proceeds  of  which  were  to  be  paid  to  the  bank.  The 
stock  was  to  be  redeemable  in  1819,  and  was  not  to  be 
sold  below  par.  But  the  Government’s  credit  had  been 
so  weakened  by  its  failure  to  meet  expenditures  through 


°  Finance,  Vol.  I,  p.  409. 
46 


Fi  rst  Bank  of  the  United  States 


additional  taxation  that  the  stock  was  selling  at  a  dis¬ 
count  when  this  bill  passed  the  House."  The  directors 
of  the  bank  saw  clearly  that  the  bill  would  not  furnish 
the  desired  relief.  Willing,  therefore,  wrote  to  the  Sec¬ 
retary  of  the  Treasury  protesting  against  the  kind  of 
relief  proposed  in  the  bill  then  before  the  Senate.  The 
bank’s  advances  amounted  to  $6,000,000,  of  which 
$4,400,000  was  due  or  payable  during  the  year  1796. 
The  existing  state  of  moneyed  operations,  and  the  pros¬ 
perity  and  reputation  of  the  bank,  absolutely  required 
the  active  use  of  a  larger  portion  of  its  specie  capital. 
If  the  Government  should  provide  no  other  means  of 
liquidating  their  claims  than  by  the  sale  of  stock  at  par, 
a  violation  of  public  faith  would  surely  follow.  Gov¬ 
ernment  stocks  fluctuate  in  price  like  other  property, 
and  if  these  could  be  sold  only  at  par  the  bank  might  have 
to  wait  indefinitely  for  reimbursement.  Moreover,  even 
if  they  were  disposed  to  make  a  sacrifice  and  receive  the 
stock  at  par,  they  were  debarred  by  a  clause  in  the  charter 
from  making  such  a  commutation.*  6 

Wolcott,  recognizing  that  the  bill  would  fail  of  its 
purpose,  addressed  a  letter  to  the  Senate  May  12,  1796, 
suggesting  that  the  commissioners  be  empowered  to 
obtain  loans  unfettered  by  any  conditions  which  might 
result  in  a  failure  of  public  credit.0  The  act  was,  in 
consequence,  modified  so  as  to  allow  not  more  than  one- 
half  the  stock  to  be  sold  below  par ;  and  as  a  final  resource 
the  commissioners  were  authorized  to  sell  the  bank  shares. 

a  Goodrich  to  Oliver  Wolcott,  sr.,  May  6,  1796,  Gibbs,  Vol.  I,  p.  336. 

6  Communication  to  Senate,  May  11,  1796,  Finance,  Vol.  I,  p.  412. 

c  Gibbs,  Vol.  I,  p.  348. 


47 


National  Monetary  Commission 


The  Government  Saee  or  Bank  Stock. 

\ 

Even  in  its  amended  form  the  act  was  unsatisfactory, 
and  the  new  securities  thus  authorized  went  a-begging. 
After  a  lapse  of  several  months  only  $80,000  had  been 
sold,  and  the  commissioners  were  compelled  to  sell  some 
of  the  government  holdings  of  bank  stock  to  reimburse 
the  bank.  Hamilton  deplored  the  sale  of  the  bank 
stock  and  declared  that  he  wished  to  forget  there  was 
a  bank  or  a  treasury  in  the  United  States.  Writing  to 
Wolcott,  he  said:  “I  shall  consider  it  as  one  of  the  most 
infatuated  steps  that  ever  was  adopted.”®  Wolcott,  too, 
opposed  the  sale,  and  it  was  only  resorted  to  by  the  com¬ 
missioners  upon  the  most  urgent  compulsion.  On  Janu¬ 
ary  24,  1797,  Wolcott  reported  the  sale  of  2,160  shares 
of  bank  stock  on  a  credit  of  sixty  days  without  interest 
at  $500  (a  premium  of  25  per  cent).* 6  The  proceeds, 
$1,080,000,  together  with  $120,000  realized  on  the  sale 
of  the  new  government  stock  up  to  that  time,  were  paid 
over  to  the  bank.0  By  July,  1797,  620  more  shares  were 
sold  through  the  bank  as  agent,  387  shares  at  a  premium 
of  20  per  cent,  the  rest  at  25  per  cent  advance,  netting 
a  total  of  $304,260.  They  were  sold  mostly  in  small 
lots  of  6,  10,  20,  and  50  shares. d  By  November  30,  1797, 
Wolcott  had  made  additional  payments  to  the  bank  to 
the  amount  of  $560,000,  making  for  the  year  a  reduction 
of  about  one-fourth  of  the  indebtedness.  Thereafter  the 
Government  made  greater  effort  to  reduce  the  debt, 

a  Works,  Vol.  VI,  p.  143. 

6  The  bulk  of  these  shares  were  sold  in  Philadelphia,  a  few  in  New  York 
and  Boston. — Finance,  Vol.  I,  pp.  468-469. 

c  Finance,  Vol.  I,  p.  467. 

d  For  details  of  these  sales,  see  Finance,  Vol.  I,  pp.  467-500;  ibid.,  Vol. 
II,  P-  35i- 


48 


First  Bank  of  the  United  States 


but  it  was  not  entirely  discharged  for  several  years. a 
These  sales  of  bank  stock,  rendered  necessary  by  the 
stupid  failure  of  Congress  to  provide  adequate  revenues 
by  resort  to  taxation,  or  its  desire  to  embarrass  the 
administration,* 6  reduced  the  holdings  of  the  Government 
to  2,220  shares.  These  were  sold  in  1802  to  the  Barings 
at  a  premium  of  45  per  eent.c  Thenceforth  the  Govern¬ 
ment  ceased  to  be  a  stockholder.  Exclusive  of  divi¬ 
dends,  the  Government  made  a  profit  of  $671,860.  The 
dividends  amounted  to  $1,101,720  in  addition. d 

Circulating  Notes. 

The  act  of  Congress  laying  duties  on  imports,  which 
went  into  effect  August  1,  1789,  provided  for  the  accept¬ 
ance  of  gold  and  silver  only  in  payment  of  duties.  Hamil¬ 
ton,  however,  construed  the  object  of  this  provision  to  be 
the  exclusion  of  payments  of  the  notes  of  the  States,  and 
“  the  securing  the  immediate  or  ultimate  collection  of  the 
duties  in  specie,  as  intended  to  prohibit  to  individuals  the 
right  of  paying  in  anything  except  gold  or  silver  coin ;  but 
not  to  hinder  the  Treasury  from  making  such  arrange¬ 
ments  as  its  exigencies,  the  speedy  command  of  the  public 
resources,  and  the  convenience  of  the  community  might 
dictate,  those  arrangements  being  compatible  with  the 
eventual  receipt  of  the  duties  in  specie.  The  measure  is 
understood  by  all  concerned  to  be  temporary.  Indeed, 
whenever  a  national  bank  shall  be  instituted,  some  new 
disposition  of  the  thing  will  be  a  matter  of  course.” e 

oBolles,  Financial  History,  Vol.  I,  p.  139.  cSee  below,  p.  85. 

&  Gibbs,  Vol.  I,  p.  348.  ^Seybert,  Statistics,  p.  519. 

e  Finance,  Vol.  I,  p.  49. 


7069 — 10 - 4 


49 


National  Monetary  Commission 


The  charter  of  the  Bank  of  the  United  States,  therefore, 
provided  specifically  that  its  notes  should  be  receivable  in 
all  payments  to  the  United  States.  Both  the  parent  bank 
and  the  several  branches  issued  notes,  the  lowest  denomi¬ 
nation  being  $5.  The  total  amount  in  circulation  never 
exceeded  $6,000,000.  The  notes  issued  by  the  branches 
were  signed  by  the  president  and  cashier  of  the  main  bank. 
The  cashier  of  each  branch  gave  duplicate  receipts  for 
them,  one  copy  to  remain  in  the  hands  of  the  branch  presi¬ 
dent,  the  other  to  be  kept  by  the  president  of  the  parent 
bank.  At  first  the  bank  established  the  rule  of  making 
the  notes  payable  only  at  the  places  where  they  were 
issued.  Subsequently,  it  undertook  to  receive  them  in 
Philadelphia  or  at  any  branch,  but  a  short  experience  with 
this  practice  led  to  its  discontinuance.0  The  fact  that  the 
bank  refused  to  accept  the  notes  of  its  own  branches  gave 
occasion  for  much  criticism,  but  the  rule,  under  the  con¬ 
ditions  existing  at  that  time,  was,  probably,  a  wise  one. 
It  compelled  each  branch  to  stand  upon  its  own  bottom, 
and  checked  any  possible  disposition  to  overissue.  On 
the  other  hand,  this  rule  protected  the  bank  from  the 
effects  of  a  sudden  demand  for  payment,  at  any  of  its 
offices,  of  a  large  accumulation  of  its  bills.  The  principle 
was  recognized  in  the  charter  of  the  second  Bank  of  the 
United  States.* 6 

For  protection  against  loss  in  transmission  “  half  notes,” 
or  duplicates,  were  issued  and  widely  employed.  Pay¬ 
ment  of  these  notes  could  be  secured  only  upon  presenta- 

°  Minute  book,  Bank  of  North  America,  April  27,  1795. 

&  Finance,  Vol.  IV,  p.  809. 


50 


tssTON  cauecf  school 

BliSIhitSS  admin 


First  Bank  of  the  United  States 


tion  of  both  halves  of  upon  furnishing  a  guaranty  of  the 
destruction  of  the  missing  half. 

The  bank  also  issued  post  notes  in  various  denomina¬ 
tions,  not  infrequently  of  $100,  and  having  various  terms 
to  run.  Generally,  they  were  payable  thirty  days  after 
the  post  date.  They  were  signed  by  the  president  and 
cashier  of  the  bank,  and  instead  of  being  made  payable  to 
the  bearer,  as  with  the  ordinary  circulating  notes,  were 
made  payable  to  the  order  of  some  merchant  or  trader  who 
would  pass  them  by  indorsement  in  the  course  of  business. 
They  differed  in  no  essential  particular  from  the  ordinary 
personal  promissory  notes,  except  that  the  bank  stood 
behind  the  promise.  The  papers  of  this  period  contained 
frequent  notices  of  the  loss  in  transit  of  these  post  notes 
and  of  application  to  the  bank  for  renewal  or  payment. 

By  making  all  duties  payable  in  notes  of  the  Bank  of 
the  United  States,  these  notes  gained  a  far  more  extensive 
circulation  than  those  of  any  other  bank.  Moreover,  the 
bank  and  its  branches  exercised  a  salutary  restraint  upon 
overissue  by  other  banks  by  following  the.  practice  of 
presenting  promptly  the  notes  of  other  banks  received 
over  their  counters. 

Owing  to  the  lack  of  published  reports,  it  is  impossible 
to  present  statistics  showing  the  volume  of  notes  issued 
at  different  dates.  In  18x1,  just  before  liquidation,  the 
total  note  issues  amounted  to  $6,152,553,  of  which  about 
$5,000,000  was  outstanding.  The  mother  bank  had 
issued  $1,600,000,  of  which  $1,500,000  was  in  circulation; 
New  York  had  about  $1,000,000  in  circulation  against 
$1,200,000  issued;  Boston  issued  only  $435,680,  of  which 
$259,248  was  on  hand;  Charleston  and  Savannah  each  had 

51 


^  C  p  .n 


National  Monetary  Commission 


put  out  over  $800,000,  the  bulk  of  which  was  in  circula¬ 
tion;  the  total  issue  of  the  New  Orleans  branch,  $192,140, 
was  in  circulation. 

Counterfeiting  of  Notes. 

As  early  as  1794,  counterfeiting  of  bank  notes  became 
alarmingly  prevalent.  Counterfeits  of  the  $5  bills  of  the 
Bank  of  the  United  States  were  especially  common.0  In 
March  of  that  year,  a  joint  committee  from  the  Bank 
of  North  America  and  the  Bank  of  the  United  States  met 
to  take  action.  The  two  institutions  joined  in  offering  a 
reward  of  $1,000  for  the  apprehension  of  the  counter¬ 
feiters.  Winchester,  Va.,  was  headquarters  for  a  nest  of 
them,  and  in  April,  1794,  George  Simpson,  assistant 
cashier  of  the  United  States  Bank,  and  the  teller  of  the 
Bank  of  North  America  were  sent  there  to  gather  and 
present  evidence  against  them.  They  were  instructed 
to  post  hand  bills  in  every  tavern  and  public  place  along 
the  route  advertising  rewards  for  the  detection  of  the 
counterfeiters.5  In  1798,  Congress  passed  an  act  making 
it  a  felony  to  counterfeit  the  notes  of  the  Bank  on  penalty 
of  imprisonment  for  from  three  to  ten  years,  or  ten  years’ 
imprisonment  and  a  fine  of  $5,000.°  In  1807,  this  act 
was  amended  so  as  to  include  the  passing  of  counterfeit 
notes. d  The  courts  had  decided  that  the  former  law  was 
inconsistent  with  itself  and  would  not  support  an  indict¬ 
ment  for  knowingly  uttering  as  true  a  forged  paper. e 

a  Minutes,  Bank  of  North  America,  March  31,  1794. 
b  Ibid.,  April  30,  1794. 
c  Act  June  27,  1798. 
d  Act  February  24,1807. 
e  4  Cranch,  167. 


52 


First  Bank  of  the  United  States 


Cooperation  with  the  Mint. 

Under  the  terms  of  the  coinage  act  of  February  9,  1793, 
all  foreign  silver  coins,  except  Spanish  milled  dollars 
and  parts  of  such  dollars,  ceased  to  be  a  legal  tender  after 
October  15,  1797 .  These  coins,  however,  constituted  a 
considerable  part  of  the  silver  in  circulation,  and  much 
embarrassment  and  loss  resulted.  The  Bank  of  the 
United  States  showed  a  willingness  to  receive  French 
crowns  and  other  silver  coins  at  current  rates  as  a  legal 
tender.  The  Treasury  Department,  therefore,  sent  out 
a  circular  authorizing  collectors  of  the  customs  and  super¬ 
visors  of  the  revenue  to  accept  such  coins  in  payment  to 
the  Government.  Not  until  1857  did  these  foreign  gold 
and  silver  coins  cease  entirely  to  be  a  legal  tender.0 

As  late  as  1798,  the  bulk  of  the  bank’s  specie  supply 
consisted  of  French  and  Spanish  coins,  for  which  there  was 
a  large  foreign  demand  at  that  time.  The  mint  received 
these  foreign  coins  from  the  bank  in  sums  not  exceeding 
$10,000. b  The  specie  in  the  vaults  of  the  bank,  collected 
on  government  account,  was  not  regarded  as  the  exclu¬ 
sive  property  of  the  United  States;  it  was  considered 

« 

rather,  as  an  aggregate  fund  in  which  the  Government  and 
the  bank  were  jointly  interested.  The  bank,  however, 
was  always  willing  to  cooperate  with  the  mint  by  advanc¬ 
ing  foreign  coins  and  bullion  to  be  recoined.  It  was  the 
chief  source  of  supply  of  bullion  for  coinage,  and  the 
temporary  depository  of  bullion  until  required  in  the  mint 
operations.0 

a  Hepburn,  Contest  for  Sound  Money,  pp.  48,  497;  11  stat.  L.  163. 

&  Finance,  Vol.  II,  pp.  503,  506. 

c  Finance,  Vol.  II,  pp.  165,  224,  458,  61 1. 


53 


National  Monetary  Commission 


On  January  n,  1803,  the  Director  of  the  Mint  reported 
that  the  most  of  the  bank’s  specie  was  in  gold  coin,  and 
that  for  some  time  past  they  had  been  canceling  their  $5 
notes,  substituting  half-eagles  “by  which  our  coins  begin 
to  be  more  generally  dispersed  among  the  people.”0 

The  Treasury  and  the  Bank — Foreign  Exchange 

Operations. 

The  relations  of  the  bank  to  the  Treasury  were,  as 
designed  by  its  establishment,  of  a  most  intimate  char¬ 
acter.  In  addition  to  making  loans,  it  aided  the  Govern¬ 
ment  in  its  foreign  exchange  operations ;  it  was  the  deposi¬ 
tory  of  a  large  part  of  the  government  funds;  it  assisted 
the  importers  in  the  payment  of  customs  duties;  it  trans¬ 
ferred  the  public  funds  from  place  to  place  at  its  own 
expense. 

The  article  of  the  charter  which  set  forth  the  objects 
in  which  the  bank  might  trade,  specifically  permitted 
dealing  in  bills  of  exchange.  In  view  of  its  superior 
resources,  the  wide  distribution  of  its  funds  through  the 
medium  of  its  eight  branches,  its  practical  control  of  the 
specie  supply  of  the  country,  and  its  intimate  relation 
to  the  Government,  it  is  but  natural  that  the  Bank  of  the 
United  States  should  have  secured  the  lion’s  share  of  the 
exchange  business,  both  foreign  and  domestic.  The 
purchase  of  the  Government’s  foreign  remittances  gen¬ 
erally  fell  to  the  bank  or  one  of  its  more  important 
branches.  At  certain  periods  the  volume  of  this  business 
on  government  account  was  very  large.  That  it  was  profit¬ 
able  may  be  inferred  from  the  fact  that  the  second 

“Finance,  Vol.  II,  p.  18. 


54 


Ft  rst  Bank  of  the  United  States 


Bank  of  the  United  States  was  eager  to  secure  a  monopoly 
of  it.a 

Hamilton  utilized  the  services  of  the  Bank  of  the  United 
States,  as  well  as  some  of  the  state  banks,  in  negotiating 
the  foreign  bills  drawn  upon  the  American  commissioners 
in  Amsterdam  and  elsewhere.  He  was  accused  of  dis¬ 
playing  favoritism  toward  the  bank.  In  a  communication 
to  one  of  the  papers,  in  1793,  “Observer”  takes  Hamilton 
sharply  to  task  for  his  rather  curt  report  to  the  House  of 
Representatives  in  obedience  to  a  resolution  calling  for  a 
report  of  certain  operations  and  accounts  of  the  Treasury, 
especially  in  relation  to  the  bank  in  the  matter  of  the 
foreign  loans.*  &  “Observer”  suggests  that  the  proceeds 
of  these  loans,  instead  of  being  placed  in  the  Treasury, 
where  they  would  be  subject  to  official  checks,  were 
deposited  in  the  bank  “in  concert  with  the  directors, 
many  of  them  members  of  the  legislature,  well-trained 
partisans  of  the  fiscal  faction,  and  deeply  immersed  in 
paper  speculations.”0 

In  a  letter  to  the  House  of  Representatives,  February 
19 ,  1793,  Hamilton  replied  rather  brusquely,  but  in  con¬ 
siderable  detail,  to  the  criticism  that  the  proceeds  of  the 
foreign  bills  served  no  object  of  public  utility,  and  that 
they  were  calculated  merely  to  indulge  a  spirit  of  favorit¬ 
ism  toward  the  Bank  of  the  United  States.  He  presented 
a  detailed  statement  of  all  receipts  on  account  of  these  bills 
which  began  in  March,  1791,  and  ended  in  March,  1792, 
showing  that  the  government  deposits  in  the  Bank  of  the 

a  McCulloh  to  Secretary  Crawford,  March  17, 1817,  Finance,  Vol.  IV,  p.  774. 

&  Journal,  House  of  Representatives,  March  1,  1793,  pp.  151-156. 

c  General  Advertiser,  February  27,  1793. 


55 


National  Monetary  Commission 


United  States  were  about  one-fourth  of  those  in  the  Bank 
of  North  America  and  one-half  of  those  in  the  Bank  of 
New  York,  these  two  institutions  being  agents  of  the 
Treasury  for  the  sale  of  the  foreign  bills.  The  Bank  of 
New  York  continued  as  a  depository  of  public  revenues 
until  April  i,  1792,  when  the  New  York  branch  of  the 
Bank  of  the  United  States  went  into  operation.  Indeed, 
a  portion  of  the  government  deposits,  as  shown  in  the 
following  table,  was  continued  in  the  state  banks  through 
the  year  1792.  After  the  bank  got  well  under  way  a 
concentration  of  the  public  deposits  in  that  institution, 
growing  out  of  its  relation  to  the  Government,  followed 
as  a  matter  of  course.  But  this  concentration  was  accom¬ 
plished  gradually  by  drafts  upon  the  other  depositories 
to  meet  government  disbursements,  rather  than  by 
direct  transfer. 


56 


Statement  of  cash  in  the  Treasury,  showing  monthly  balance  during  1792. 

[Cents  have  been  omitted  throughout  table  ] 


First  Bank  of  the  United  States 


1 

1 

1 

1 

1 

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to 

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Sum: 
bills 
retur 
by  B 
of  t 
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land. 

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57 


National  Monetary  Commission 

From  the  foregoing  treasury  statements,  Hamilton 
demonstrated  that  so  far  as  any  advantages  accrued 
from  the  deposits  on  account  of  foreign  bills  drawn  prior 
to  April,  1792,  they  inured  to  the  benefit  of  the  Bank  of 
New  York  and  the  Bank  of  North  America,  and  not  to 
the  Bank  of  the  United  States  or  its  branches.  Indeed, 
in  transferring  its  fiscal  operations  from  the  state  banks  j 
to  the  Bank  of  the  United  States  regard  had  been  paid  to 
the  convenience  of  the  former,  and  so  little  solicitude  had 
been  shown  for  the  accommodation  of  the  latter  that  the 
Treasury  had  been  criticised  as  consulting  the  accommo¬ 
dation  of  the  Bank  of  the  United  States  less  than  was  due 
to  its  relation  to  the  Government  and  to  the  services 
expected  from  it.a 

Government  Deposits. 

The  charter  of  the  bank  contained  no  stipulation  that 
the  Government  should  deposit  the  public  funds  in  the' 
bank  and  its  branches,  nor  was  there  any  engagement  on 
the  part  of  the  bank  to  transfer  the  public  funds  from  one 
part  of  the  country  to  another.  “  It  therefore  became 
the  subject  of  arrangement  between  the  Treasury  and  the 
bank,  and  the  benefit  of  the  exclusive  deposits,  it  is  be¬ 
lieved,  was  made  the  condition  of  the  service.”6  The 
successive  Secretaries  of  the  Treasury  seem  to  have  been 
content  to  leave  the  public  deposits  with  the  bank  in  ex¬ 
change  for  the  services  rendered  by  the  latter  in  trans¬ 
mitting  government  funds  and  in  accommodating  the 
Treasury  with  loans  when  called  upon.  Though  Gallatin 
had  occasion  to  turn  to  the  bank  for  assistance  only  once, 

a  Finance,  Vol.  I,  p.  223.  &  Finance,  Vol.  IV,  p.  808. 


58 


First  Bank  ?  of  the  United  States 


be  stated  that  it  always  showed  a  willingness  to  aid  the 
Government  in  every  way;  and  he  was  careful  not  to  dis¬ 
please  it  because  he  recognized  that  in  an  emergency  the 
Treasury  would  have  to  depend  upon  it  for  loans.  This 
arrangement  was  satisfactory  to  both  the  Government 
and  the  Treasury,  and  continued  under  the  administra¬ 
tions  of  Hamilton’s  successors.  Gallatin  said  of  it: 
“They  place  instantly  our  money  where  we  want  it,  from 
one  end  of  the  Union  to  the  other,  which  is  done  on  the 
tacit  condition  of  our  leaving  our  deposits  with  them.”a 
He  maintained  that  the  state  banks  could  not  effect  the 
transmission  of  the  public  funds  with  the  same  facility  or 
to  the  same  extent  as  the  Bank  of  the  United  States 
through  its  several  branches.6  No  step  seems  to  have 
been  taken,  therefore,  toward  requiring  the  bank  to  pay 
interest  on  the  public  deposits.  In  recommending  the 
renewal  of  the  charter,  however,  Gallatin  proposed  that 
the  bank  should  be  required  to  pay  3  per  cent  on  deposits 
above  $3,000,000,  which  would  provide  the  Government 
with  a  means  of  accumulating  an  emergency  or  war  fund. c 

The  reports  of  the  bank  that  have  been  preserved  are 
so  few  and  fragmentary  that  it  is  impossible  to  present  a 
progressive  statement  of  the  government  deposits.  Dur¬ 
ing  the  first  few  years  of  the  bank’s  existence  the  Gov¬ 
ernment  was  not  a  large  and  probably  not  a  very  profit¬ 
able  depositor. 

At  the  beginning  of  the  year  1793  the  treasury  funds 
amounted  to  $783,212,  of  which  $624,431  was  on  deposit 
in  the  bank  and  the  four  branches  that  had  been  estab¬ 
lished  by  that  time.d  The  largest  balance  to  the  credit 

a  See  p.  64. 

b  See  pp.  71,  78. 


59 


c  See  p.  73. 
d  See  table,  p.  53. 


National  Monetary  Commission 


of  the  Government  at  any  one  time  was  at  the  close  of 
the  year  1806,  when  its  balance  reached  nearly  $5,500,000. 
By  the  close  of  the  year  1810,  however,  it  had  fallen  to 
less  than  $2,000,000. 

In  obedience  to  a  resolution  of  the  House,  Gallatin 
submitted  a  statement  December  23,  1806,  of  the  amount 
of  public  deposits  in  the  several  banks  for  the  three  years 
previous.  The  Government’s  average  deposits  in  all 
banks  during  that  period  ran  from  $4,000,000  to 
$5,500,000.  The  average  balance,  considered  as  a  per¬ 
manent  deposit,  in  the  Bank  of  the  United  States  and  its 
branches  ranged  from  $3,500,000  to  $4,200,000.  The 
following  table  shows  the  government  balance  in  each  of 
these  depositories  at  the  end  of  the  year:  a 


1803. 

1804. 

1805. 

/ 

1806. 

Bank  of  the  United  States.  .  .  . 

Boston  branch . 

New  York  branch . 

Baltimore  branch . 

Washington  branch . 

Norfolk  branch . 

Charleston  branch . 

Savannah  branch . 

New  Orleans  branch . 

$996,047 

588 , 078 
1. 244, 276 
616, 177 
229 . 648 

47X.978 

430. 224 

138.591 

$1, 130,905 

666  909 
702 . 768 
227, 208 
178.034 
188, 339 

305  644 

150. 445 

$554,488 
818, 569 

1, 097. 099 

431.430 

72,398 
332. 406 
159. 180 

119  720 

121  OOO 

(a) 

$877. 505 

I,  I73.7M 

1 . 340, 620 
294.560 

305.740 

180. 595 

244. 975 
62.328 
236  748 

(«) 

Ten  other  banks . 

(a) 

(0) 

4, 285 , 81 1 

4. 036,985 

3.999.368 

5. 497- 984 

®  Small  amounts. 


The  deposits  in  the  state  banks  were  inconsiderable, 
the  Pittsburg  branch  of  the  Bank  of  Pennsylvania  carrying 
the  largest  amount,  a  total  of  $1,190,277  for  the  three 
years.  That  bank  was  used  largely  as  an  agent  in  collect¬ 
ing  the  revenues  from  the  sale  of  western  lands.  The 

# 

a  Finance,  Vol.  II,  p.  218. 


60 


First  Bank  of  the  United  States 


banks  located  in  the  leading  customs  ports  were,  of 
course,  the  largest  depositories.  The  growth  of  the 
business  of  Boston,  and  especially  of  New  York,  and  the 
decline  of  the  southern  ports  during  this  period,  are 
significant. 

Among  the  charges  brought  against  Hamilton  was 
favoritism  to  the  bank  in  making  large  deposits  of  gov¬ 
ernment  funds  instead  of  reducing  the  government  debt 
by  buying  in  stock.  Hamilton,  however,  showed  that 
speculation  had  so  increased  prices  that  profitable  pur¬ 
chases  could  not  be  made  other  than  those  he  had  nego¬ 
tiated.  He  also  entered  into  a  long  and  lucid  explana¬ 
tion  of  the  treasury  practice  of  keeping  $500,000  on  hand 
at  the  different  depositories.  This  sum  was  not  concen¬ 
trated  at  the  seat  of  the  Government,  but  was  scattered 
among  the  several  branches  from  Boston  to  Charleston. 
Funds  more  remote  than  New  York  on  one  side  and 
Baltimore  on  the  other  could  not  be  counted  upon  as 
ready  cash  in  less  time,  on  the  average,  than  sixty  days, 
“making  allowance  for  the  usual  delays  in  the  sale  of  bills 
and  the  usual  terms  of  credit.”  a 

Although  the  bank  did  not  pay  interest  on  the  govern¬ 
ment  deposits,  it  maintained  that  they  were  not  profit¬ 
able.  In  the  main,  they  were  not  permanent  deposits 
and  fluctuated  from  time  to  time  and  from  place  to  place. 
The  heaviest  and  most  frequent  demands  were  made,  of 
course,  on  the  main  bank,  which  always  stood  ready  to 
support  the  branches,  but  each  office  had  to  be  prepared 
at  all  times  to  meet  Treasury  drafts  payable  at  some  other 
office  or  bank.  These  fluctuations  in  the  deposits,  and 

a  Finance,  Vol.  I,  p.  223. 

61 


National  Monetary  Commission 


the  care  and  expense  involved  in  their  transfer,  were 
such  that  the  bank  did  not  regard  them  as  “a  profitable 
item  in  the  estimates  of  a  discount  day.”  In  support 
of  the  claim  that  the  Government  had  added  little  or 
nothing  to  its  profits,  the  bank  pointed  to  the  fact  that 
its  dividends  were  usually  less  than  those  of  other  banks 
which  had  no  government  patronage.®  On  the  other 
hand,  the  bank’s  opponents  contended  that  the  state 
banks  would  cheerfully  undertake  the  custody  and  trans¬ 
mission  of  public  funds  in  exchange  for  the  benefits  arising 
from  government  deposits.5  In  the  debates  of  1811  it 
was  claimed  that  the  large  loans  of  the  New  York  branch, 
$4,175,000  on  a  capital  of  only  $1,800,000,  were  due  to 
the  immense  deposits  of  revenue  collected  there.®  At 
different  times  state  banks  made  overtures  to  the  Treasury 
to  receive  a  share  of  the  public  deposits. d 

The  bank  dealt  largely  in  domestic  exchange,  also, 
the  premium  being  enhanced  considerably  by  the  restric¬ 
tion  of  the  circulation  of  its  notes  to  the  region  of  the 
branch  issuing  them.e  Government  funds  were  trans¬ 
mitted  by  the  bank  from  one  part  of  the  country  to  an¬ 
other  without  direct  commission  or  compensation,  but 
the  monoply  of  public  deposits  was  probably  a  liberal 
return  for  this  service. 

The  following  practice  for  the  simplification  of  the 
treasurer's  bank  account,  begun  with  the  Bank  of  North 
America,  had  been  continued  with  the  Bank  of  the  United 
States:  Bills  drawn  by  the  treasurer  upon  distant  points, 

a  Bank  Petition  for  Renewal,  April  20,  1808,  Finance,  Vol.  I,  p.  301. 

&See  p.  92.  d  See  p.  65. 

c  Ibid.  «  Finance,  Vol.  IV,  pp.  271,  272,  808,  passim. 


62 


First  Bank  of  the  United  States 


and  deposited  with  the  bank  for  sale,  were  credited  at 
once  to  his  account  as  cash,  though  they  might  be  sold 
at  credits  of  from  thirty  to  sixty  days.  It  was  under¬ 
stood,  however,  that  the  proceeds  could  not  be  drawn 
upon  until  they  were  collected.  Hence  the  actual  balance 
in  the  bank  was  always  less  than  the  apparent  amount. 
Drafts  on  supervisors  and  collectors  of  customs  were 
credited  immediately  on  deposit;  those  upon  foreign 
agents  of  the  United  States  were  not  so  credited,  but 
after  being  collected  by  the  bank  were  passed  upon  war¬ 
rants  to  the  treasurer.  Bills  deposited  in  the  bank  were 
sold  according  to  general  instructions  from  the  Secretary 
of  the  Treasury.  The  instructions  generally  were  to 
dispose  of  all  bills  drawn  on  the  domestic  revenue  at  par.° 

Aid  to  Importers. 

The  first  revenue  act  provided  that  all  duties  should 
be  paid  in  gold  or  silver  coin  only.  Upon  the  estab¬ 
lishment  of  the  bank,  however,  Hamilton  construed  this  4 
regulation  to  allow  post  notes  of  the  bank  not  having 
more  than  thirty  days  to  run  to  be  received  in  payment, 
and  circular  instructions  were  sent  out  to  all  the  custom¬ 
houses  authorizing  collectors  to  accept  these  notes.* * 6 

In  the  spring  of  1792  importations  into  Philadelphia 
were  unusually  heavy,  and  merchants  were  pressed  for 
money  with  which  to  pay  their  bonds.  Hamilton  wrote 
to  the  bank,  March  19,  1792,  reminding  it  that  these 
notes  were  thus  receivable,  leaving  it  to  the  bank  to 

a  Report  of  Committee  to  Examine  the  State  of  the  Treasury,  May  22,- 

1794,  Finance,  Vol.  I,  p.  282. 

&  Finance,  Vol.  IV,  p.  267. 


63 


N  at  i  o  n  a  l  M  on  et  a  r  y  Commission 


decide  “how  far  it  might  be  convenient  to  make  these 
operations  payable  in  such  notes,  which  might  not  be 
convenient  if  payable  immediately  in  specie  or  cash 
notes.”  In  December,  1792,  “certain  mercantile  specu¬ 
lations”  had  caused  an  unusual  pressure  for  money, 
and  Hamilton  advised  the  bank  that  he  would  have  no 
objection  if  the  notes  in  which  the  Government  was 
interested  should  be  renewed  for  thirty  days  in  all  cases 
where  it  could  be  done  with  perfect  safety  to  the  public. 

Again,  in  February  of  1793,  an  arrangement  was  made 
with  the  Bank  of  the  United  States  for  the  accommo¬ 
dation  of  the  merchants  of  Philadelphia  whose  bonds 
for  duties  were  to  become  payable  within  the  next  few 
weeks  by  which  the  bank  would  discount  their  thirty- 
day  notes  for  the  amount  of  their  bonds  and  receive 
these  notes  from  the  collector  as  cash,  to  be  drawn  for 
only  by  the  collector.  The  branch  offices  at  New  York, 
Boston,  and  Baltimore  were  advised  that  if  similar  accom¬ 
modations  seemed  necessary  at  those  points  the  Treasury 
would  not  draw  for  the  sums  involved  until  the  middle 
of  the  following  May.°  One  striking  instance  of  coop¬ 
eration  between  the  bank  and  the  Treasury  in  assisting 
the  importer  occurred  in  Wolcott’s  administration.  John 
Wilcocks,  a  Philadelphia  merchant,  received  a  cargo  of 
coffee  in  1797.  He  already  owed  so  much  for  duty 
bonds  that  he  was  unable  to  meet  the  obligation  on 
the  coffee.  He  appealed  to  the  Treasury  Department, 
and  Wolcott  suggested  to  the  bank  that  they  give  him 
The  necessary  accommodation  upon  the  presentation  of 

indisputable  paper  and  upon  the  condition  that  the 

\ 

°  Finance,  Vol.  IV,  p.  269. 


64 


Fi  rst  Bank  of  the  United  States 


sum  discounted  be  paid  in  a  post  note  to  be  deposited 
with  the  collector  of  the  customs.® 

Prior  to  1800  the  bank  was  not  utilized  in  any  special 
way  for  the  collection  of  the  public  revenue.  The  col¬ 
lectors  of  government  revenues  kept  the  collections  in 
their  own  hands,  giving  bond  for  the  faithful  discharge 
of  their  duties.  This  system  was  not  altogether  satis¬ 
factory,  for  there  was  fear  that  the  collector  might  lend 
the  public  funds  to  the  bondsmen.  It  seemed  wise, 
therefore,  both  in  the  public  and  private  interest,  to 
deposit  the  revenue  bonds  in  the  larger  ports  in  banks.- 
After  1800  the  revenue  bonds  in  the  half-dozen  largest 
cities  were  deposited  in  the  Bank  of  the  United  States 
and  its  branches,  by  which  they  were  collected.  Through 
this  agency  the  revenues  were  collected  with  greater 
punctuality  and  economy.  A  merchant  who  failed  to 
pay  his  revenue  bond  when  due  lost  all  credit  at 
the  custom-house;  and  if  he  failed  to  pay  promptly 
any  bond  deposited  in  the  bank  for  collection,  he  was 
denied  further  accommodation  at  that  bank  and  the 
privilege  of  renewing  his  paper.  Furthermore,  when¬ 
ever  any  merchant  was  known  to  be  thus  in  default, 
all  the  other  local  banks  refused  him  credit  and  called 
his  loans.  This  was  an  obligation  he  was  compelled  to 
meet  under  penalty  of  losing  his  credit  at  the  banks. 

The  bank  exercised  another  direct  influence  upon  the 
collection  of  the  revenue.  The  parent  bank  at  Phila¬ 
delphia  established  a  rule  that  any  person  whose  bond 
to  the  Government  was  deposited  there  had  the  right, 

o  Finance,  Vol.  IV,  p.  270. 


7069—10 - 5 


65 


Na  tional  M  on  et  a  r  y  Commission 


upon  securing  an  additional  indorser,  to  claim  a  dis¬ 
count  for  half  the  amount  of  his  bond.  The  proceeds 
of  this  discount  were  carried  immediately  to  the  credit 
of  the  Government.  In  this  way  one-half  of  the  bond 
was  collected  at  the  sole  risk  of  the  bank  without  any 

possibility  of  loss  to  the  Government.® 

Gallatin,  in  citing  the  advantages  derived  by  the 

Government  from  the  bank,  said:  “The  punctuality  of 
payments  introduced  by  the  banking  system  and  the 
facilities  afforded  by  the  bank  to  importers  indebted 
for  revenue  bonds  were  among  the  causes  which  enabled 
the  Government  to  collect  with  such  facility  and  with  so 
few  losses  the  great  revenue  derived  from  imports.”6 

Opponents  of  the  bank  contended,  however,  that  the 
revenues  were  nowhere  better  collected  thpn  in  those 
districts  where  there  was  no  branch  of  the  Bank  of  the 
United  States,  and  that  in  some  instances  the  state  banks 
offered  better  collection  facilities,  for  they  received  the 
notes  of  banks  which  the  Bank  of  the  United  States  and 
its  branches  would  not  accept.0 

Attitude  of  Democratic  Administrations  Toward 

the  Bank. 

The  passing  of  the  political  control  of  the  country’s 
affairs  from  the  hands  of  the  Federalists  to  those  of  the 
Democrats  at  the  beginning  of  the  nineteenth  century 
had  no  immediate  effect  upon  the  interests  or  fortunes  of 
the  bank.  Though  always  regarded  as  a  Federalist  institu¬ 
tion,  and  managed  largely  by  men  of  Federalist  leanings, 

its  affairs  were  administered  in  the  main  with  an  eye 

^Finance,  Vol.  II,  p.  452.  &  See  p.  70.  cSee  pp.  88,  90. 


I 


I 


66 


First  .  Bank  of  the  United  States 


single  to  business  and  profit,  and  it  never  became  em¬ 
broiled  in  political  controversies  as  did  its  successor,  the 
second  Bank  of  the  United  States.  Only  once  did  the 
Treasury,  under  Democratic  administrations,  apply  to 
the  bank  for  aid,  and  then  it  was  as  cheerfully  and  gener¬ 
ously  given  as  under  earlier  Federalist  administrations. 

Jefferson,  however,  never  gave  up  his  antagonism  to 
banks  in  general  and  to  the  Bank  of  the  United  States  in 
particular.  Writing  to  Adams  in  1814,  he  says:  “My 
zeal  against  those  institutions  was  so  warm  and  open  at 
the  establishment  of  the  Bank  of  the  United  States  that  I 
was  derided  as  a  maniac  by  the  tribe  of  bank  mongers.”0 
In  the  Anas  papers  he  shows  his  enmity  toward  the  bank. 
“While  the  Government  remained  at  Philadelphia,  a 
selection  of  members  of  both  Houses  were  constantly 
kept  as  directors,  who,  in  every  question  interesting  to 
that  institution,  or  to  the  views  of  the  Federal  head 
(Hamilton),  voted  at  the  will  of  that  head,  and,  together 
with  the  stockholding  members,  could  always  make  the 
Federal  vote  that  of  the  majority.  ” b 

In  1802,  the  Bank  of  Pennsylvania  ran  in  debt  to  the 
Bank  of  the  United  States  at  the  rate  of  $100,000  a  week, 
owing,  it  was  claimed,  to  the  government  deposits  in  the 
latter.  The  cashier  of  the  Bank  of  Pennsylvania  went 
to  Washington  to  apply  for  relief.  Gallatin,  writing  to 
Jefferson,  says:  “It  is  evident  tliey  have  extended  their 
discounts  too  far.  They  say  they  can  not  at  once  curtail 
without  ruining  their  customers,  chiefly  retail  shop¬ 
keepers.  Those  for  whom  the  Bank  [of  the]  United  States 
discounts  are  generally  importers.  ”  Gallatin  suggests 

0  Works  of  Thomas  Jefferson,  Vol.  VI,  p.  305.  b  Ibid.,  Vol.  IX,  p.  95. 


67 


N  at  ion  a  l  M  o  n  et  a  r  y  Commission 


three  possible  lines  of  relief:  (i)  To  write  to  the  United 
States  Bank  to  spare  them;  (2)  to  deposit  $300,000 
with  them,  or  to  direct  the  collector  at  Philadelphia  to 
deposit  part  of  his  public  money  with  them;  (3)  to  con¬ 
tract  with  them  for  part  of  the  Dutch  debt,  which,  as 
the  Government  always  paid  considerably  in  advance, 
would  have  the  effect  of  a  deposit.  He  had  proposed 
the  last  of  these  expedients  to  the  Bank  of  Pennsylvania, 
but  fearing  that  they  might  not  be  able  to  agree  upon 
terms,  he  asks  Jefferson  whether  either  of  the  other  two 
plans  might  be  adopted.  Gallatin  wanted  to  avoid  any 
step  which  would  displease  the  Bank  of  the  United  States, 
“because  they  place  instantly  our  money  where  we  may 
want  it  from  one  end  of  the  Union  to  the  other,  which  is 
done  on  the  tacit  condition  of  our  leaving  our  deposits 
with  them,  and  because  if  we  shall  be  hard  run  and  want 
money,  to  them  we  must  apply  for  a  loan.”a 

Jefferson’s  reply  again  shows  his  antipathy  to  banks, 
and  throws  light  upon  the  banking  practices  of  the  period. 
He  says  the  difficulties  of  the  Bank  of  Pennsylvania  were 
due  to  excessive  discounts  The  bank,  in  its  plea  for  help, 
had  submitted  a  statement  showing  $3,000,000  of  out¬ 
standing  debts  due  to  them.  Jefferson  calculates  that 
they  owed  $2,200,000,  with  $965,000  of  good  assets.  To 
pay  the  $1,235,000  balance,  “they  depend  on  $3,000,000 
of  debts  due  them,  the  ‘amount  of  which  shows  that  they 
are  of  long  standing,  a  part  desperate,  a  part  not  com- 
mandable.”  He  concludes,  therefore,  that  to  deposit 
public  funds  with  them  would  only  enable  them  to  con¬ 
tinue  these  excessive  discounts,  the  checking  of  which  was 

a  Adams,  Writings  of  Gallatin,  Vol.  I,  p.  80. 


68 


First  Bank  of  the  United  States 


the  only  means  of  avoiding  bankruptcy.  The  least 
dangerous  plan  would  be  to  recommend  indulgence  to  the 
Bank  of  the  United  States,  but  that  would  virtually  be 
asking  it  to  lend  money  to  the  other  bank  in  order  that  it 
might  continue  lending  to  others.  “The  monopoly  of  a 
single  bank,”  he  says,  “  is  certainly  an  evil.  The  inultipli-  l 
cation  of  them  was  intended  to  cure  it,  but  it  multiplied' 
an  influence  of  the  same  character  with  the  first,  and  com¬ 
pleted  the  supplanting  the  precious  metals  by  a  paper  cir¬ 
culation.  Between  such  parties  the  less  we  meddle  the 
better.”0 

Another  illustration  of  Jefferson’s  position  is  seen 
in  the  fact  that  although  there  was  a  tacit  understand¬ 
ing  that  the  government  deposits  were  to  be  kept  in 
the  Bank  of  the  United  States  and  its  branches,  he 
viewed  with  favor  the  overtures  which  state  banks  made 
from  time  to  time  to  the  Government  to  secure  a  share 
of  them.  In  the  autumn  of  1802,  the  Bank  of  Baltimore 
applied  for  a  deposit  of  government  funds.  Jefferson 
wrote  to  Gallatin:  “The  consideration  is  very  weighty 
that  it  is  held  by  citizens  while  the  stock  of  the  United 
States  Bank  is  held  in  so  great  a  proportion  by  foreigners.”  6 
If  Hamilton  regarded  the  Bank  of  the  United  States  as  a 
political  agent  of  great  possible  usefulness  to  the  new 
government,  Jefferson  valued  no  less  the  political  support 
of  banks  in  general.  In  the  above-mentioned  letter,  he 
says:  “It  is  certainly  for  the  public  good  to  keep  all  the 
banks  competitors  for  our  favors  by  a  judicious  distribu¬ 
tion  of  them,  and  thus  to  engage  the  individuals  who 
belong  to  them  in  the  support  of  the  reformed  order  of 


0  Jefferson’s  Works, Vol.  IV,  p.  439.  &  Writings  of  Gallatin, Vol.  I,  p.  ioi. 

69 


Nat  i  o  n  a  l  M  o  n  e  t  a  r  y  Commission 


things.”  Again,  writing  to  Gallatin,  July  12,  1803,  Jeffer¬ 
son  says:  “  As  to  the  patronage  of  the  Republican  bank  at 
Providence,  I  am  decidedly  in  favor  of  making  all  the  banks 

1 

Republican  by  sharing  deposits  among  them  in  proportion 
to  the  dispositions  they  show;  if  the  law  now  forbids  it,  we 
should  not  permit  another  session  of  Congress  to  pass  with¬ 
out  amending  it.”a 

With  the  acquisition  of  the  Louisiana  territory  from 
France  in  1 803  and  the  consequent  expansion  of  American 
trade  in  the  Mississippi  Valley,  the  need  of  more  adequate 
fiscal  and  banking  facilities  became  imperative.  Gallatin 
urged  the  Bank  of  the  United  States  to  establish  a  branch 
at  New  Orleans.  The  bank  was  disinclined  to  hazard 
its  resources  in  the  new  and  undeveloped  territory. 
While  negotiations  were  in  progress,  Claiborne,  governor 
of  the  territory,  took  it  upon  himself  without  instructions 
to  establish  a  bank  called  the  “Louisiana  Bank,”  with  a 
capital  of  $600, 000,  which  might  be  increased  to  $2,000,000. b 
Gallatin  was  apprehensive  that  the  Bank  of  the  United 
States  would  seize  this  opportunity  to  break  off  negotia¬ 
tions  for  the  establishment  of  the  proposed  branch,  and 
suggested  to  Jefferson  that  Claiborne  should  be  instructed 
to  revoke  the  charter,  leaving  the  Louisiana  Bank  on  the 
footing  of  a  private  association.0  The  New  Orleans 
branch  project  stirred  Jefferson  to  a  fresh  outburst  against 
the  bank.  Writing  to  Gallatin,  December  13,  1803,  he 
says:  “This  institution  is  one  of  the  most  deadly  hostility 
existing  against  the  principles  and  forms  of  our  Constitu- 

a  Writings  of  Gallatin,  Vol.  I,  p.  129. 

b  United  States  Gazette,  April  9,  1804. 

c  Gallatin  to  Jefferson,  April  12,  1804,  Writings  of  Gallatin,  Vol.  I,  p.  184. 


70 


Ft  rst  Bank  of  the  United  States 


tion.”  Its  hostility  was  evident  from  a  knowledge  of  the 
principles  of  the  persons  composing  the  body  of  directors  in 
every  bank,  principal  or  branch;  from  their  opposition 
to  the  measures  and  principles  of  the  Government,  and 
to  the  election  of  those  friendly  to  it;  and  from  the  senti¬ 
ments  of  the  papers  they  support.  He  urges  that  in  time 
of  war,  the  bank  with  its  many  branches  might  be  a  great 
obstruction,  withdrawing  its  aid  or  dictating  the  terms 
of  peace.  Now,  while  the  Government  was  strong  they 
ought  to  bring  “this  powerful  enemy  to  a  perfect  subor¬ 
dination  under  its  authorities.  The  first  measure  would 
be  to  reduce  them  to  an  equal  footing  only  with  other 
banks  as  to  the  favors  of  the  Government.’ ’  a 

f 

Gallatin's  Defense  of  the  Bank  in  1803. 

In  reply,  Gallatin  cited  the  advantages  the  Govern¬ 
ment  derived  from  banks,  and  especially  from  the  Bank  of 
the  United  States,  as  follows:  A  safe  place  for  the  deposit 
of  public  money;  the  instantaneous  transmission  of  funds 
from  one  part  of  the  country  to  another;  the  great  facility 
which  an  increased  circulation  and  discounts  give  to  the 
collection  of  the  revenue.  For  these  reasons  he  was 
anxious  to  see  a  bank  established  at  New  Orleans.  He 
could  see  none  but  political  objections,  which,  he  thought, 
lost  their  force  when  the  dependence  of  banks  upon  the 
Government  was  properly  considered.  “They  are  formid¬ 
able  only  as  individuals  and  as  merchants,  and  not  as 
bankers.  Whenever  they  shall  appear  to  be  really  danger¬ 
ous,  they  are  completely  in  our  power  and  may  be 
crushed.”5 

°  Jefferson’s  Works,  Vol.  IV,  p.  518.  b  Writings,  Vol.  I,  p.  17 1. 


7i 


National  Monetary  Commission 


The  branch  at  New  Orleans  was  duly  established  under 
the  act  passed  March  23,  1804,  which  authorized  the  bank 
to  establish  offices  of  discount  and  deposit  in  any  part  of 
the  Territories  or  dependencies  of  the  United  States.®  Gal¬ 
latin’s  persuasion  overcame  Jefferson’s  objections  and  he 
signed  the  bill,  thus  waiving,  so  the  friends  of  the  bank 
afterwards  maintained,  all  opposition  to  the  bank  on  the 
score  of  its  unconstitutionality. b 

Application  for  Recharter. 

In  1808,  three  years  before  the  charter  expired,  the 
stockholders  of  the  bank  memorialized  Congress  for  a 
renewal.  The  memorial  recited  that  “in  view  of  the 
extensive  operations  of  the  bank,  its  intimate  connection 
with  public  credit  and  finances,  and  the  wide  dispersal  of 
the  stockholders,  duty  to  the  Government,  to  the  com¬ 
mercial  world,  and  to  themselves,  prompted  them  to 
submit  the  expediency  of  protracting  the  duration  of  their 
charter.”  Without  assurance  upon  this  point,  prudence 
and  justice  would  demand  the  adoption  of  measures  to 
effect  a  gradual  dissolution.  Dissolution  would  unavoid¬ 
ably  impair  the  fiscal  machinery  provided  by  the  bank  for 
the  collection  and  payment  of  public  funds,  while  the 
withdrawal  of  $10,000,000  of  banking  capital  would  pro¬ 
duce  serious  embarrassment  to  the  trade  and  commerce 

of  the  country.  The  petition  set  forth  the  advantages 

\ 

a  United  States  Statutes,  Vol.  II,  p.  274. 

b  And  yet  in  the  face  of  this  obvious  waiver,  Jefferson  had  the  temerity 
to  write  to  Eppes,  November  6,  1813:  “During  the  life  of  the  United  States 
Bank,  the  nation  had  time  to  consider  the  constitutional  question,  and  when 
the  renewal  was  proposed  they  condemned  it,  not  by  their  representatives 
in  Congress  only,  but  by  express  instructions  from  different  organs  of  their 
will.” — Jefferson’s  Works,  Vol.  VI,  p.  232. 


72 


First  Bank  of  the  United  States 


reaped  by  the  Government  from  the  bank.  During  the 
thirteen  years  that  the  Government  had  been  a  stockholder 
it  had  made  a  neat  profit  through  the  difference  between 
its  loan  from  the  bank  at  6  per  cent  and  the  dividends  on 
its  stock  which  averaged  about  8  per  cent,  and  when, 
finally,  it  disposed  of  its  stock  it  realized  a  profit  of  over 
$650,000.  The  bank  had  aided  the  Government  in  rnain-^ 
taining  the  public  faith  and  credit  both  at  home  and  abroad 
by  advancing  loans  amounting  to  millions  of  dollars  at  5, 
and  6  per  cent.  By  establishing  branches,  in  some  cases 
upon  the  suggestion  of  the  Secretary  of  the  Treasury  for 
the  peculiar  accommodation  of  the  public,  and  “  not  always 
for  the  general  emolument  of  the  bank,”  it  had  enabled 
the  Government  to  carry  on  its  fiscal  operations  with  ease, 
security,  and  economy.  These  fiscal  services  had  been 
performed  without  charge  or  compensation.  The  peti¬ 
tioners  were  not  insensible  to  the  advantages  they,  in 
turn,  had  derived  from  this  fiscal  relationship  to  the  Gov¬ 
ernment.  But  these  advantages  consisted,  not  so  much 
in  the  government  deposits  which  were  subject  to  such 
fluctuations  and  to  so  much  care  and  cost  in  transfer  that 
they  could  hardly  be  regarded  as  profitable.  That  the 
Government  had  added  little  to  the  profits  arising  from 
the  general  business  of  the  bank  was  shown  by  the  fact 
that  “  the  dividends  of  the  bank  had  always  been  moderate, 
and  usually  less  than  those  of  other  banks.”  The  advan¬ 
tage  to  the  bank  came  rather  from  the  confidence  of  the 
Government,  “founded  upon  a  constant  knowledge  of  the 
interior  management  and  condition  of  the  bank,”  which, 
in  turn,  had  attracted  the  confidence  of  both  Europe  and 


73 


N  at  io  n  at  M  on  et  a  r  y  Commission 


America  and  had  given  it  a  character  of  dignity  and  sta¬ 
bility.  The  memorial  concluded  by  assuring  the  Gov¬ 
ernment  that,  at  a  time  of  some  national  apprehension  and 
alarm,  it  might  confidently  rely,  in  every  emergency,  upon 
the  prompt  and  legitimate  aid  of  the  bank.a 

Recharter  Favored  by  Gaeeatin. 

The  memorial  was  referred  to  Gallatin,  who  brought  in 
a  report,  March  3,  1809,  in  every  way  favorable  to  the 
bank.*  6  Indeed  in  the  struggle  for  renewal  which  ensues, 
Gallatin  became  the  advocate  and  champion  of  the  bank, 
laboring  as  faithfully,  but  with  less  success,  to  preserve 
and  perpetuate  its  life  as  Hamilton  had  done  twenty  years 
before  to  bring  it  into  existence.  In  doing  so,  he  en¬ 
countered  even  more  opposition  and  obloquy  from  his 
own  party  than  Hamilton  had  met  at  the  hands  of  the 
opposition.  The  founder  lived  to  see  the  beneficent  ef¬ 
fects  of  the  bank  enjoyed  both  by  the  Government  and 
the  business  interests  of  the  country;  the  defender  and 
advocate  witnessed  its  fall  and  a  resulting  stream  of  dis¬ 
aster  and  ruin. 

In  stating  the  advantages  derived  from  the  bank  by  the 
Government,  Gallatin  laid  stress  upon  the  safe-keeping  and 
transmission  of  the  public  funds,  the  economical  collec¬ 
tion  of  the  revenue,  and  the  aid  furnished  to  the  Govern¬ 
ment  in  the  matter  of  loans.  The  punctuality  of  payments 
introduced  by  the  banking  system,  and  the  facilities 
afforded  by  the  bank  to  importers  indebted  for  revenue 
bonds,  were  among  the  causes  which  had  enabled  the 

a  Communicated  to  Senate,  April  20,  1808,  Finance,  Vol.  I,  p.  301. 

6  Finance,  Vol.  II,  p.  351. 


74 


First  Bank  of  the  United  States 


Government  to  collect  with  such  facility  and  with  so  few 
losses  the  great  revenue  derived  from  imports.  The  nu¬ 
merous  state  banks  might  afford  considerable  assistance 
to  the  Government  in  its  fiscal  operations,  but  they  could 
not  effect  the  transmission  of  public  funds  with  the  same 
facility  or  to  the  same  extent  as  the  Bank  of  the  United 
States  through  its  several  branches.  Moreover,  the  supe¬ 
rior  capital  of  the  latter  afforded  greater  security  against 
losses,  and  greater  resources  in  making  loans.  Another 
argument  advanced  by  Gallatin  was  that  the  Govern¬ 
ment,  in  respect  to  its  own  operations,  should  not  be  de¬ 
pendent  upon  institutions  over  which  it  had  no  control 
whatever.  A  national  bank  would  feel  stronger  induce¬ 
ments,  both  from  interest  and  from  a  sense  of  duty,  to 
afford  the  Union  every  assistance  in  its  power.  Though 
the  Government,  during  the  first  ten  years  of  Gallatin’s 

administration,  had  been  able  to  finance  its  obligations 

♦ 

without  asking  the  bank  for  aid,  it  had  been  eminently 
useful  in  making  the  necessary  advances  in  earlier  years; 
and  a  similar  disposition  had  been  shown  repeatedly  when 
treasury  matters  had  rendered  it  advisable  to  ascertain 
whether  new  loans  might  be  obtained  if  needed.  _ 

The  strongest  objection  raised  against  the  renewal  of  the 
charter  was  the  large  holdings  of  the  bank’s  stock  abroad, 
requiring  the  payment  of  dividends  to  foreigners.  Gal¬ 
latin  turned  the  tables  on  these  objectors  by  noting  that 
if  the  bank  should  be  liquidated,  $7,200,000,  the  amount 
of  foreign  holdings,  would  have  to  be  remitted  at  once, 
whereas,  if  the  charter  were  renewed,  only  the  dividends  of 
about  S]/2  per  cent  would  be  sent  abroad.  The  renewal  of 
the  charter  would,  in  that  respect,  act  as  a  foreign  loan 


75 


National  Monetary  Commission 

bearing  8 yi  per  cent.  He  suggested  that  this  objection 
might  be  removed  by  a  modification  of  the  charter  “pro¬ 
viding  for  the  repayment  of  that  portion  of  the  princi¬ 
pal  by  a  new  subscription  to  the  same  amount  in  favor  of 
citizens.”  Apparently  Gallatin  did  not  look  far  enough 
ahead  to  see  that,  unless  foreigners  were  specifically  for¬ 
bidden  to  hold  stock  of  the  bank,  a  considerable  portion 
of  so  good  an  investment  would  soon  again  be  in  the 
hands  of  foreigners.  But  he  dismissed  the  matter  of  for¬ 
eign  holdings  as  trivial  compared  with  the  manifest  public 
advantages  to  be  derived  from  a  renewal  of  the  charter. 

Modifications  Recommended  by  Gaeeatin. 

_^<By  the  time  of  Gallatin’s  report  it  had  become  quite 
popular  for  the  States  to  exact  bonuses  from  the  banks 
chartered  under  their  authority.  Gallatin  considered 
this  possibility  with  respect  to  the  recharter  of  the  Bank 
of  the  United  States.  Assuming  that  the  market  rate 
of  interest  would  continue  at  6  per  cent  for  the  next  twenty 
years,  and  that  the  dividends  of  the  bank  would  continue 
to  average  8  X  percent,  the  profits  arising  from  the  banking 
privilege  would  be  equal  to  an  annuity  of  $250,000  on  the 
capital.  That  annuity  payable  semiannually  would  be 
worth  almost  $2,890,000.  Such  a  huge  bonus  no  bank 
would,  of  course,  be  willing  to  pay  for  a  charter.  Gallatin 
thought  that  about  $1,250,000  would  be  the  maximum 
which  could  be  obtained  as  a  bonus  if  it  was  deemed 
advisable  to  sell  the  renewal  of  the  charter  for  a  fixed 
sum  of  money.  He  believed,  however,  that  there  were 
other  considerations  much  more  important  than  the 
mere  temporary  aid  that  might  come  through  the  exac- 


76 


Fi  rst  Bank  of  the  United  States 


tion  of  a  bonus.  His  chief  suggestions  may  be  briefly 
summarized.  The  bank  should  pay  interest  on  govern¬ 
ment  deposits  in  excess  of  $3,000,000.  It  should  be  obli¬ 
gated  to  lend  the  Government  a  sum  not  to  exceed  three- 
fifths  of  its  capital  at  a  rate  not  over  6  per  cent,  the 
amount  of  such  loans  to  be  advanced  by  the  bank  in 
monthly  installments  and  to  be  repaid  at  the  pleasure 
of  the  Government.  The  capital  should  be  increased  to 
$30,000,000,  as  follows:  $5,000,000  to  be  subscribed  by 
citizens  of  the  United  States  in  such  a  way  as  to  make 
an  equitable  apportionment  among  the  several  States 
and  Territories;  $15,000,000  to  be  subscribed  by  such 
States  as  might  desire  to  enter,  and  a  branch  to  be  estab¬ 
lished  in  each  subscribing  State  if  applied  for  by  the 
State;  all  subscriptions  to  be  in  specie  or  stock  of  the 
United  States;  state  subscriptions  to  be  payable  in  ten 
annual  installments  or  sooner,  their  shares  of  bank  stock 
to  be  nontransferable.  Both  the  general  and  the  state 
governments  should  have  some  share  in  the  direction 
of  the  bank,  the  general  government  appointing  a  few 
directors  for  the  parent  bank,  and  the  state  governments 
appointing  a  few  directors  in  their  respective  state 
branches. 

Gallatin  urged  in  support  of  this  plan  that  by  requiring 
interest  on  the  public  deposits  the  Government  might 
in  times  of  peace  and  prosperity  accumulate  a  fund  suffi¬ 
cient  to  meet  periods  of  war  and  calamity.  Further,  the 
Government  could  always  rely  upon  a  loan  of  $18,000,000. 
Payment  of  the  greater  part  of  the  proposed  increase  of 
capital,  in  ten  annual  installments,  would  be  gradual  and 
keep  pace  with  the  steady  progress  of  the  country,  and, 


77 


N  at i o n a  l  M  on  et  ary  Commission 


finally,  the  bank  itself  would  form  an  additional  bond  of 
common  interest  and  union  among  the  several  States. 

Indecisive  Action  by  Congress. 

The  memorial  of  the  bank  for  renewal  was  presented  to 
the  House  March  26,  1808,  and  referred  to  the  Committee 
of  the  Whole,  but  it  got  no  further  during  the  session.  It 
was  presented  in  the  Senate  April  20,  1808,  and  referred 
to  the  Secretary  of  the  Treasury  for  consideration  and 
report  at  the  next  session.  On  March  3,  1809,  Gallatin’s 
report  was  communicated  to  the  Senate. 

The  memorial  of  the  bank  was  presented  to  the  House 
again  January  29,  1810,  and  referred  to  a  committee, 
which  made  a  report,  February  19,  in  favor  of  renewal. 
Agents  of  the  bank  had  appeared  before  the  committee 
authorized  “to  make  compensation,  either  by  loans  at  a 
rate  of  interest,  or  by  a  sum  of  money  to  be  agreed  upon, 
or  by  an  increase  of  the  capital  stock,  by  a  number  of 
shares  to  be  taken  and  subscribed  for  by  the  United 
States,  to  an  amount  adequate  to  the  compensation  to  be 
agreed  upon  for  such  renewal.”  On  April  2,  1810,  Uove, 
of  Virginia,  reported  the  plan  of  a  national  bank  to  be 
established  at  Washington  with  branches  in  such  States 
and  Territories  as  should  apply  for  them.  The  States 
were  to  be  allowed  to  subscribe  an  alloted  number  of 
shares.  April  7,  1810,  a  bill  was  introduced  to  continue 
for  twenty  years  the  existing  Bank  of  the  United  States, 
with  the  charter  modifications  suggested  by  Gallatin. 
The  bank  was  to  pay  a  bonus  of  $1,250,000;  it  was  to 
loan  the  Government,  upon  three  months’  notice,  any 
sum  not  to  exceed  $5,000,000  at  not  over  6  per  cent;  and 


78 


First  Bank  of  the  United  States 


it  was  to  pay  3  per  cent  on  all  government  deposits  above 
$3,000,000  remaining  for  a  whole  year.  This  bill  was 
debated  in  Committee  of  the  Whole  April  13,  1810,  but  it 
never  got  any  further. 

Upon  the  failure  of  the  House  of  Representatives  to  act 
upon  the  memorial  the  bank  contracted  its  discounts  and 
the  other  Philadelphia  banks  followed  its  example.  The 
resulting  pressure  produced  great  business  distress  through¬ 
out  the  city.a  The  curtailments  were  applied  particu¬ 
larly  to  accommodation  paper,  of  which  all  the  banks 
appear  to  have  carried  a  considerable  amount.  It  was  said 
of  the  Bank  of  the  United  States  that  it  met  its  contrac¬ 
tions  on  accommodation  paper  by  discounting  an  equal 
amount  of  real  or  business  paper.  Discounts  on  these 
accommodation  notes  were  in  the  nature  of  permanent 
loans,  the  practice  of  the  banks  being  to  renew  them 
every  sixty  days.  The  directors  of  the  Bank  of  the 
United  States,  finding  that  their  action  in  calling  loans  had 
caused  so  much  distress,  made  an  arrangement  with  the 
state  banks  that  all  should  continue  their  discounts 
“  until  the  last  hour.”*  6 

Carey,  while  admitting  that  money  was  scarce,  says  it 
had  often  been  much  more  scarce  without  exciting  nearly 
so  much  comment.  For  a  long  period  past,  except  during 
the  embargo,  when  the  banks  had  difficulty  in  keeping 
their  funds  employed,  there  had  been  a  scarcity  of  money 
two  or  three  times  a  year.  Brokers  were  now  discounting 
good  notes  at  9  and  12  per  cent,  while  in  other  times  the 
rates  had  been  as  high  as  1  yi  and  even  2  per  cent  a  month. 

a  See  testimony  of  Philadelphia  delegations — Clarke  &  Hall,  pp.  323-327. 

6  Ibid.,  p.  438. 


79 


National  Monetary  Commission 


People  then  submitted  to  the  high  rates  without  com¬ 
plaining.  But  now  that  the  charter  of  the  bank  was  an 
issue,  political  capital  was  being  made  of  the  money 
pressure.® 


Second  Petition  tor  Recharter. 


Congress  having  failed  to  act  upon  the  first  memorial, 
the  stockholders  submitted  a  second  one,  dated  December 
io,  1810,  only  three  months  before  the  expiration  of  the 
charter.  The  memorial  recited  that  a  consideration  of  the 
stockholders’  own  convenience  and  security  would  have 
led  them  to  prepare  for  dissolution,  but,  in  the  belief  that 
the  general  interest  required  and  would  obtain  a  con¬ 
tinuance  of  their  charter,  they  had  delayed  taking  this 
step,  which  would  inevitably  entail  so  much  public  as 
well  as  private  distress.  In  general,  the  memorial 
claimed  that  the  bank,  by  its  early  establishment,  its 
extensive  and  combined  operations,  and  its  large  capital, 
had  become  acquainted  with  and  had  materially  advanced 
the  trading  interests  of  the  entire  country.  Not  being 
restricted  to  any  particular  district,  it  had  acted  as  the 
general  guardian  of  commercial  credit,  and  had  pre¬ 
vented  the  balance  of  trade  in  the  different  States  from 
producing  a  deficiency  of  money  in  any  of  them.  It  had 
protected  and  aided  the  state  banks  when  unexpectedly 
pressed,  and  generally  they  had  the  use  of  not  less  than 
one-tenth  of  its  capital.  It  had  been  liberal  but  discreet 
in  its  loans  to  merchants  and  manufacturers,  and  by  pro¬ 
viding  a  fund  sufficient  to  meet  all  reasonable  accommo¬ 
dations  it  had  repressed  usurious  lending.  The  memorial 


a  Letters  to  Doctor  Seybert,  p.  19. 


80 


First  Bank  of  the  United  States 


laid  great  stress,  again,  upon  its  services  and  benefits  to 
the  Government,  and  concluded  with  a  statement  of  the 
disastrous  consequences  that  would  inevitably  attend  the 
dissolution  of  the  bank.  Great  and  general  injury  would 
ensue  from  the  depreciation  in  the  value  of  property,  the 
stagnation  of  business,  and  the  check  to  commercial 
enterprise.  To  discharge  the  debts  due  to  the  bank,  the 
resources  of  borrowers  would  be  drained,  while  failure  to 
do  so  would  give  an  irreparable  blow  to  commercial  credit 
and  punctuality.  Heavy  loss  would  result  to  the  public 
revenues,  charitable  institutions,  widows,  children,  and 
others  interested  in  the  stock.® 

The  petition  of  the  stockholders  was  presented  in  both 
bodies  of  Congress,  December  18,  1810,  and  for  the  next 
three  months  the  question  of  renewal  was  uppermost  both 
in  Congress  and  in  the  country  at  large. b 

Crawford,  chairman  of  the  Senate  committee  to  which 
the  petition  for  renewal  was  referred,  wrote  to  Gallatin, 
requesting  his  opinion  whether  the  renewal  of  the  bank’s 
charter  would  not  greatly  facilitate  the  collection  of  the 
revenue  and  promote  the  public  welfare.  Gallatin 
replied,  January  30,  1811,  that  in  a  report  to  the  Senate 
two  years  before  he  had  expressed  his  opinion  in  favor  of 
a  renewal  of  the  charter,  and  that  his  opinion  remained 
unchanged.  The  advantages  of  banks  in  the  fiscal  opera¬ 
tions  of  the  Government  were  unquestionable.  The  only 
question  was  whether  these  services  could  be  most  con¬ 
veniently  performed  by  a  national  bank  or  by  a  number 
of  state  banks.  State  banks  might  be  used,  and  in  case 

a  Finance,  Vol.  II,  p.  451. 

b  For  detailed  proceedings  and  debates,  see  Clarke  and  Hall,  pp.  135-47 1. 


7069 — 10 


6 


81 


National  Monetary  Commission 


of  nonrenewal  of  the  charter  must  be  used,  by  the  Treas¬ 
ury,  but  surely  with  less  convenience  and  safety.  “  If  the 
Bank  of  the  United  States  could  be  removed  without 
affecting  either  its  numerous  debtors,  the  other  moneyed 
institutions,  or  the  circulation  of  the  country,  the  ordinary 

fiscal  operations  of  Government  would  not  be  materially 

% 

deranged,  and  might  be  carried  on  by  means  of  another 
general  bank  or  of  state  banks.  But  the  transition  will 
be  attended  with  much  individual,  and  probably  with  no 
inconsiderable  public  injury.”  Adverting  to  the  question 
of  constitutionality,  Gallatin  wished  to  say  that  “  the  bank 
charter  having,  for  a  number  of  years,  been  acted  upon, 
or  acquiesced  in,  as  if  constitutional,  by  all  the  constituted 
authorities  of  the  nation,  and  thinking,  myself-,  the  use  of 
the  banks  to  be  at  present  necessary  for  the  exercise  of 
the  legitimate  powers  of  the  general  Government,  the 
continuation  of  a  bank  of  the  United  States  has  not,  in 
the  view  which  I  have  been  able  to  take  of  the  subject, 
appeared  to  me  to  be  unconstitutional.  ”a 

Many  years  after  this  memorable  struggle  over  the 
renewal  of  the  bank’s  charter  Gallatin  wrote  to  Nicolas 
Biddle,  president  of  the  second  Bank  of  the  United 
States:  “In  1810  the  weight  of  the  administration  was 
in  favor  of  renewal,  Mr.  Madison  having  made  his  opinion 
known  that  he  considered  the  question  as  settled  by 
precedent,  and  myself  an  open  and  strenuous  advocate. 
We  had  the  powerful  support  of  Mr.  Crawford  in  the 
Senate,  and  no  formidable  opponent  in  either  House 
but  Mr.  Clay,  a  majority  of  political  friends  in  both 
Houses,  and  almost  all  the  Federalist  votes  on  the  ques- 

°  Finance,  Vol.  II,  p.  480. 


82 


First  Bank  of  the  United  States 


tion,  with  no  other  untoward  incumbrance  but  the  per¬ 
sonal  opposition  to  Mr.  Madison  or  myself  of  the  Clintons, 
the  Maryland  Smiths,  Leib,  and  Giles.  The  banking 
system  had  not  yet  penetrated  through  the  country, 
extending  its  ramifications  through  every  hamlet,  and 
the  opposition,  due  to  the  jealousy  or  selfishness  of  rival 
institutions,  was  confined  to  a  few  cities;  yet  the  ques¬ 
tion  was  lost.”® 

Attitude  of  Banks  and  Trade  Organizations. 

In  general,  the  banks  and  trade  organizations  of  the 
country  favored  renewal.  They  apprehended  loss  to 
themselves  and  prostration  of  credit  and  confidence  in 
all  lines  of  business  if  such  a  large  concern  should  sud¬ 
denly  be  forced  to  liquidate.  The  directors  of  the  Bank  of 
New  York  sent  a  memorial  to  Congress  in  January,  1811, 
asking  that  the  Bank  of  the  United  States  be  granted  a 
renewal.  They  regarded  it  as  highly  useful  to  the  state 
banks.  From  the  extent  of  its  capital,  its  numerous 
branches  all  over  the  country,  and  its  government  protec¬ 
tion,  it  was  able  “to  equalize  the  balance  of  specie  capital 
among  the  different  cities,  and  in  case  of  any  sudden 
pressure  upon  the  merchants  to  step  forward  to  their 
aid  in  a  degree  which  the  state  institutions  were  unable 
to  do.”6  A  meeting  of  the  joint  committee  of  the  four 
state  banks  in  Philadelphia — North  America,  Pennsylva¬ 
nia,  Philadelphia,  and  Farmers  and  Mechanics’ — held  De¬ 
cember  15,  1810,  adopted  resolutions  declaring  that 

“general  distress  and  inconvenience  will  attend  the  ces¬ 
sation  of  so  great  a  monied  institution,’  ’  and  expressing 

^Gallatin's  Writings,  Vol.  II,  p.  435.  &  Domett,  Bank  of  New  York,  p.  64. 


83 


Na  t  ion  a  l  M  o  n  et  ar  y  Commission 


the  opinion  that  “  it  can  not  be  injurious  but  advantageous 
to  the  state  institutions.  ”°  The  Philadelphia  banks  sent 
a  memorial  to  the  state  legislature,  also,  saying  that  the 
dissolution  of  the  bank  would  be  materially  injurious 
to  the  state  banks.  The  Chamber  of  Commerce  of 
Philadelphia,  in  a  memorial  to  the  Senate,  December 
24,  1810,  urged  recharter  and  set  forth  many  facts  favor¬ 
able  to  the  bank  based  upon  local  experience.  Citi¬ 
zens  of  Pennsylvania,  they  asserted,  held  $1,000,000 
of  the  bank’s  stock,  nearly  one- third  of  the  total  held 
in  the  United  States,  and  had  bought  the  stock  at  a  pre¬ 
mium  through  faith  in  its  management  and  perpetuity. 
Some  $7,000,000  was  held  abroad,  but  there  could  be 
no  valid  objection  to  this;  it  was  not  prohibited  in  the 
charter,  and  the  Government  itself  had  but  recently  sold 
its  own  holdings  to  foreigners.  The  establishment  of 
the  bank  had  opened  large  sources  of  accommodation 
and  insured  punctuality  in  trade.  As  a  result  its  stock 
had  advanced  and  attracted  a  large  amount  of  foreign 
capital,  thus  enabling  the  country  to  trade  upon  out¬ 
side  capital  at  an  interest  below  its  market  value.  The 
interest  and  concerns  of  other  banks  were  interwoven 
with  the  existence  of  the  national  bank.  From  the  col¬ 
lection  of  customs  bonds  at  the  Bank  of  the  United  States, 
it  always  held  a  large  amount  of  paper  of  other  banks. 
Its  continuance,  therefore,  was  “almost  indispensable  to 
their  safety;”  its  liquidation  would  produce  “all  the  evils 
of  prostrated  credit  and.  general  delinquency  in  which 
the  other  banks  must  largely  share.”  As  to  the  admin¬ 
istration  of  the  bank,  these  representative  business  men, 

a  Philadelphia  National  Bank,  p.  52. 


84 


Fi  rst  Bank  of  the  United  States 

many  of  whom  had  had  dealings  with  the  bank,  testified 
that  it  had  extended  its  accommodations  impartially 
and  to  the  greatest  extent  compatible  with  safety.  The 
foreign  trade  had  for  some  time  been  generally  embar¬ 
rassed  because  of  the  embargo,  and  “during  the  past 
year  merchants  had  labored  under  the  pressure  of  a  heavy 
sequestration  of  property  abroad.”  Specie  continued 
to  be  exported,  and  the  demand  for  money  was  unusually 
great.  They  must  needs  fall  back  upon  the  bank  to 
tide  them  over.  Mercantile  interests,  therefore,  looked 
with  alarm  to  the  suspension  of  the  circulation  of 
$15,000,000,  the  average  amount  of  its  loans,  to  the  accu¬ 
mulation  of  specie  in  the  bank  to  the  amount  of  its 
capital  (in  order  to  pay  off  the  stockholders),  to  the 
withdrawal  of  $7,000,000  of  capital  from  the  country, 
and  to  the  payment  of  duties  in  specie  instead  of  the  notes 
of  the  bank.® 

Memorials  and  Popular  Discussion. 

The  friends  of  the  bank  in  Philadelphia  were  active  in 
its  support.  A  petition  signed  by  868  Philadelphia  citi¬ 
zens,  dated  January  31,  1811,  recited  the  alarm  with 
which  they  witnessed  the  opposition  to  renewal,  and 
prayed  that,  if  renewal  were  denied,  the  bank  should  be 
given  time  gradually  to  close  its  affairs. b  A  flood  of  peti¬ 
tions  flowed  in  from  all  sides,  both  for  and  against  renewal. 
A  memorial  of  Pittsburg  citizens,  dated  February  4,  1811, 
attacked  the  bank  memorial  and  everyone  who  had 
favored  renewal.  It  stated  that  the  bank  had  shown  “a 
studied  delay  in  its  collections  to  gain  a  renewal  under 

<*a Finance,  Vol.  II,  p.  453.  b  Ibid.,  p.  470. 


✓ 


85 


National  Monetary  Commission 


stress  of  weather;  a  studied  pressure  on  individuals  and 
state  banks  to  gain  auxiliaries;  a  studied  memorial,  con¬ 
taining  the  most  daring  insults  on  the  dignity  and  inde¬ 
pendence  of  a  free  people.”  In  rebuttal  of  the  bank’s 
claim  that,  to  accommodate  the  Government,  it  had 
established  branches  at  places  disadvantageous  to  its 
business,  and  from  which  no  profit*  was  expected,  the 
Pittsburg  petition  exhibited  a  statement  of  the  capital 
and  loans  at  the  several  branches.  According  to  this 
statement,  all  the  branches,  except  Boston  and  Norfolk, 
had  loans  outstanding  to  more  than  twice  the  amount 
of  their  allotted  capital.  Washington,  one  of  the  two 
branches  established  at  the  request  of  the  Government, 
had  loaned  $485,285  on  a  capital  of  $200,000,  and  New 
Orleans,  the  other,  had  outstanding  loans  of  $611,516 
on  a  capital  of  $500,000.  The  total  capital  of  the  eight 
branches  was  $5,300,000;  total  loans,  $10,965,256.  The 
memorial  exclaims:  “A  serious  disappointment  to  men 
who  expected  no  profit.”0  In  a  like  spirit  of  bombast 
and  bad  reasoning,  it  belittled  every  claim  and  benefit 
urged  in  the  memorial  of  the  bank. 

J.  J.  Astor,  one  of  the  wealthiest  men  in  New  York,  sent 
a  verbal  message  to  Gallatin  assuring  him  that  if  renewal 
were  refused,  all  his  funds  and  those  of  his  friends  to  the 
amount  of  $2,000,000  would  be  at  the  command  of  the 
Government,  either  in  importing  specie,  circulating  gov¬ 
ernment  paper,  or  in  any  other  way  that  wrould  prevent 
distress  arising  from  dissolution.  Astor,  it  was  said, 

°  Ibid.,  p.  479. 


86 


Ft  rst  Bank  of  the  United  States 


“would  go  great  lengths,  partly  from  pride,  and  partly 
from  wish  to  see  the  bank  down.”  a 

The  most  direct  and  pertinent  testimony  to  show  the 
disastrous  consequences  of  nonrenewal  was  that  sub¬ 
mitted  to  the  Senate  committee  by  two  delegations  from 
Philadelphia,  one  representing  the  manufacturers  and 
mechanics,  the  other  the  merchants  of  the  city.* 6  They 
were  a  unit  in  testifying  to  the  impartiality  of  the  bank, 
the  desire  for  its  continuance,  the  absence  of  party  influ¬ 
ence  from  its  management,  and  the  stagnation  of  business 
and  prostration  of  credit  which  they  believed  would 
accompany  dissolution.  Some  of  the  delegation  of 
mechanics,  all  of  whom  were  Democrats,  had  been  cus¬ 
tomers  of  the  bank  for  many  years,  and  they  united  in 
contradicting  the  idea  that  the  bank  was  partial  or  was 
influenced  in  the  slightest  by  the  politics  of  its  customers. 
One  of  them  said,  explicitly,  that  in  Philadelphia  opposi¬ 
tion  to  renewal  was  confined  principally  to  the  newspapers. 
The  Aurora,  the  organ  aud  mouthpiece  of  the  Democratic 
party  in  Philadelphia,  but  a  bitter  enemy  of  Gallatin,  in 
an  editorial,  November  8,  1810,  offered  20  reasons  why 

the  bank’s  charter  should  not  be  renewed.  Great  stress 

• 

was  laid  upon  the  fact  that  two- thirds  of  the  stock  was 
held  by  foreigners  and  that  the  bank  was  subservient 
to  British  interests.  Duane,  the  editor,  charged  the  bank 
with  employing  its  influence  in  local  elections,  especially 
at  Charleston  and  New  Orleans.  The  most  novel  reason 
suggested  for  winding  it  up,  however,  was  “in  order  that 
the  public  should  know  how  far  it  has  fulfilled  or  how 

a  Gallatin  to  Madison,  January  5,  1811,  Writings,  Vol.  I,  p.  495. 

&  Leg.  and  Doc.  His.,  pp.  325-328. 


87 


N  at  i on  a l  M  on  et  ar  y  Commission 


far  it  has  executed  its  trust;  of  which  there  are  various 
opinions,  which  never  can  be  reconciled  but  by  a  clear 
winding  up.” 

Among  the  ablest  advocates  of  renewal  in  the  pamphlet 
literature  of  the  day  was  Mathew  Carey.  His  experience 
as  a  director  of  the  Bank  of  Pennsylvania  for  several  years 
gave  authority  to  his  utterances  on  financial  topics.  He 
complained  that  “the  obligation  of  secrecy  in  banking 
transactions”  precluded  him  from  the  use  of  many  of  the 
most  important  documents  necessary  to  a  complete 
defense  of  the  bank.  Duane,  in  the  Aurora,  and  other 
opponents  of  the  bank,  charged  it  with  deliberate  and 
malicious  attempts  to  depress  the  money  market  and, 
by  curtailing  discounts,  to  cause  general  business  distress 
in  order  to  force  Congress  into  renewing  its  charter. 
Carey,  however,  in  a  series  of  letters  to  the  Daily  Advertiser, 
attributed  the  distress  and  the  scarcity  of  money  to  the 
multiplication  of  branch  banks  in  Pennsylvania  (the  Bank 
of  Pennsylvania  and  the  Bank  of  Philadelphia  each  had 
four  branches),  and  to  the  necessity,  recently  imposed 
on  the  mother  banks  by  act  of  the  legislature,  of  receiving 
the  notes  of  the  branch  banks  in  payment.®  The  notes 
of  the  branches  were  paid  largely  in  Philadelphia  for 
purchases,  and  when  deposited  in  any  except  the  mother 
banks  acted  as  balances  against  them,  drawing  their  specie. 
Only  notes  of  the  Bank  of  the  United  States  were  accepted 
in  payment  of  duty  bonds,  so,  in  the  spring  and  fall,  there 
was  a  steady  flow  of  specie  to  the  bank  from  the  four  state 
banks,  which  compelled  them  to  curtail  their  business 
somewhat.  Moreover,  the  low  rate  of  exchange  on  London 

“November  2,  1810. 


% 


88 


First  Bank  of  the  United  States 


was  an  important  factor.  Exchange  was  at  about  five 
below  par;  recent  extensive  importations  promised  a  rise, 
so  a  merchant  having  funds  in  England  and  who  wanted 
money  preferred  to  borrow  from  the  banks  at  6  per  cent 
rather  than  to  sell  bills  at  the  low  rate.  On  the  other 
hand,  those  who  had  remittances  to  make  to  England 
strained  their  credit  at  the  bank  to  raise  money  to  buy 
bills  at  the  low  rate.  Hence  both  buyers  and  sellers  of 
exchange,  in  unusual  numbers,  pressed  the  banks  for 
additional  loans. 

In  his  letters  to  Doctor  Seybert,  Carey  argued  that, 
since  the  Government  had  sold  to  Sir  Francis  Baring 
$1,287,600  worth  of  bank  shares  at  a  premium  of  45  per 
cent  it  would  disgrace  American  credit  not  to  recharter 
the  bank.  He  admitted  that  there  was  ground  for  com¬ 
plaint  in  the  fact  that  the  bank  had  not  accepted  the 
notes  of  its  branches  in  payment  from  its  customers.  It 
owed  that  accommodation  to  the  public.  He  tried  to 
turn  the  point  of  the  criticism  by  stating  that  the  Bank 
of  Pennsylvania  and  the  Bank  of  Philadelphia  refused, 
in  the  same  way,  to  receive  the  notes  of  their  branches  at 
Pittsburg  and  Washington  until  they  were  compelled  to 
do  so  by  an  act  of  legislature.  Carey’s  chief  argument 
for  renewal  was  the  terrible  calamity  that  would  overtake 
the  business  community  if  the  bank  should  be  compelled 
to  wind  up.a 

Dr.  Eric  Bollman  was  another  ardent  advocate  of 
renewal.  He  estimated  that  the  banks  of  the  country 
had  brought  into  use  bank  credits  and  bank  notes  amount¬ 
ing  to  $70,000,000  and  that  they  held  not  over  $15,000,000 

a  Letters  to  Dr.  Adam  Seybert,  p.  64. 

89 


N  at i o n a  l  M  on  et  ary  Commission 


specie  in  their  vaults.  The  winding  up  of  the  Bank  of  the 
United  States  would,  therefore,  involve  the  destruction 
of  $55,000,000  of  circulating  medium,  which  was  only 
sufficient  for  the  daily  transactions  of  the  country.  He 
thought  Congress  would  not  dare  to  make  so  dangerous 
an  experiments 

The  state  banks,  though  their  note  issues  and  discounts 
had  been  kept  in  check  by  the  superior  resources  and 
power  of  the  Bank  of  the  United  States,  favored  the 
extension  of  the  charter,  and  memorialized  Congress  to 
that  effect. h 

A  large  majority  of  both  branches  of  the  Pennsylvania 
legislature,  however,  were  opposed  to  the  bank,  and 
resolutions  were  passed  requesting  the  Pennsylvania 
Senators  and  Representatives  at  Washington  to  vote 
against  the  renewal  of  the  charter.  They  likewise 
opposed  the  granting  of  a  charter  to  any  other  bank 
without  securing  the  consent  of  the  legislature  of  the 
0wL_te  where  it  was  to  operate.0  During  the  course  of  the 


debates  on  renewal,  resolutions  opposing  renewal  were 
presented  from  the  legislatures  of  Virginia,  Massachusetts, 


Maryland. 


Debate:  on  Recharter. 


/  The  debate  on  the  bank  renewal  in  Congress  centered 
f  mainly  around  the  two  questions  of  the  constitutionality 
and  expediency  of  the  bank.  d  On  the  first  point  the 
arguments  developed  nothing  new.  The  supporters  of  the 


a  Paragraphs  on  Banks,  p.  50. 
b  See  p.  79. 

c  House  Journal  (Pa.),  December  13,  1810. 
d  For  full  debates,  see  Leg.  and  Doc.  Hist.,  pp.  1 13-471. 


90 


First  Bank  of  the  United  States 

- L - , 

bank  met  the  long-drawn  arguments  of  those  who  still 
persisted  that  it  was  unconstitutional  by  submitting  that 
its  constitutionality  was  decided  at  the  time  the  charter 
was  granted.  That  decision  had  met  with  the  general 
approbation  of  the  States  and  the  people.  Branches  had 
been  established  in  several  of  the  States  and  the  bills  cirJ 
culated  everywhere.  For  twenty  years  the  bank  had 
received  the  countenance  and  patronage  of  the  Govern-  I 
ment,  which  originally  owned  two-fifths  of  its  capital.  It  \ 
had  received  repeated  sanction  from  the  different  adminis¬ 
trations,  and  especially  from  Jefferson  and  the  Democratic 
party,  by  authorizing  the  establishment  of  a  branch  at 
New  Orleans  and  selling  a  million  of  the  government 
stock  to  British  subjects  at  a  profit  of  $400,000. 

The  debates  on  the  expediency  of  the  bank  did  throw 
some  new  light  upon  its  methods  and  machinery  and  its 
relations  to  the  Government,  to  the  other  banks,  and  to 
the  general  business  public.  In  this  connection  it  was 
argued  that  in  proportion  as  the  bank  became  a  source  of 
supply  to  the  Government  it  ceased  to  be  one  to  the 
merchants.  Fisk,  of  New  York,  estimated  that  the  exports 
of  the  country,  which  when  the  bank  was  established 
amounted  to  $18,000,000,  had  risen  by  1804  to  $76,000,000, 
an  increase  due  in  large  part  to  the  increased  activity  of 
capital  created  and  promoted  by  the  Bank  of  the  United 
States.  The  bulk  of  the  country’s  trade  was  conducted 
on  a  paper  medium,  specie  having  largely  disappeared. 
By  closing  up  the  bank  at  least  one-third  of  the  $50,000,000 
of  circulating  medium  in  the  country  would  be  checked 
and  all  paper  credit  would  receive  a  mortal  wound.  The 
estimated  $10,000,000  of  specie  in  the  country  would, 


91 


National  Monetary  Commission 


under  dissolution,  be  collected  by  the  bank.  The  result 
would  be  general  embarrassment  and  distress. 

It  was  generally  conceded  that  the  Bank  of  the  United 
States,  by  virtue  of  its  large  ■  capital  and  the  amount  of 
specie  it  always  carried,  had  regulated  the  discounts  and 
note  issues  of  the  state  banks,  compelling  them  to  preserve 
a  just  proportion  between  their  liabilities  and  actual  funds. 
Senator  Smith,  of  Maryland,  a  director  of  the  state  bank 
in  Baltimore,  and  one  of  the  most  violent  opponents  of 
renewal,  denied  that  the  state  banks  either  received  or 
required  any  check  by  the  Bank  of  the  United  States. 
He  said  the  “trifling  branch'’  of  the  bank  in  Virginia  was 
located  in  a  corner  of  the  State  with  which  the  people  of 
the  State  had  very  little  intercourse.  Their  intercourse 
was  with  the  banks  of  Richmond  and  Fredericksburg. 
The  Bank  of  Virginia  was  capitalized  at  $1,500,000;  it 
had  $2,000,000  in  its  vaults  and  had  recently  declared  a 
dividend  of  10  per  cent.  He  concluded  that  the  Bank  of 
Virginia  received  no  check  from  the  United  States  Bank, 
and  instead  of  the  branch  of  the  latter  keeping  the  state 
banks  in  check  the  fact  was  that  the  Bank  of  Virginia  kept 
the  branch  at  Norfolk  in  check. 

Smith  also  denied  the  necessity  or  utility  of  the  bank 
and  its  branches  in  the  collection  of  government  revenues, 
and  contended  that  the  bank  had  no  instrumentality 
whatever  in  obtaining  payment  of  the  revenue  bonds. 
He  had  been*  informed  that  nowhere  was  the  revenue 
better  collected  than  in  the  busy  New  England  towns  out¬ 
side  of  Boston,  the  only  place  having  a  branch  in  the  whole 
region.  The  Boston  branch,  then,  was  nothing  more  than 
a  treasury  chest,  “an  office  where  the  Secretary  of  the 


92 


First  Bank  of  the  United  States 

Treasury  keeps  an  account  to  know  whether  the  state 
banks  transmit  the  money  properly  to  Boston  or  not.” 

So,  too,  in  Georgia,  North  Carolina,  and  South  Carolina 
the  duties  were  as  well  or  better  paid  where  there  was  no 
branch.  At  one  time  the  Bank  of  Manhattan,  in  New 
York,  held  $188,000  of  government  funds.  The  New 
York  branch  of  the  bank  had  refused  to  receive  Connecti¬ 
cut  or  Rhode  Island  paper,  and  the  Secretary  was  com¬ 
pelled  to  deposit  it  in  the  Manhattan  Bank,  which  had 
agreed  to  accept  the  paper.  Again,  the  branch  bank  at 
Washington  had  refused  to  accept  Virginia  paper  from 
the  collectors,  “and  refused  to  give  any  aid  or  assistance 
in  the  collection  of  the  revenue,  except  that  which  went  to  ^  " 
their  own  emolument.”  But  the  Bank  of  Columbia 
opened  its  vaults  to  all,  receiving  on  deposit  the  paper  of 
Virginia,  Maryland,  or  Pennsylvania,  and  gave  checks  on 
some  of  the  banks  of  those  States  for  the  amount.  This 
kind  of  accommodation  could  not  be  had  from  the  branch 
bank.  The  revenues  derived  from  the  sale  of  public  lands 
in  Ohio  and  Kentucky  were  collected,  not  by  the  Bank  of 
the  United  States,  but  by  the  Pittsburg  branch  of  the 
Bank  of  Pennsylvania.  The  government  deposits  in  the 
Manhattan  Bank  arose  from  the  collection  of  revenues  in 
Rhode  Island  and  Connecticut.  It  was  apparent,  there¬ 
fore,  that  the  collection  and  transmission  of  public  funds 
could  be  accomplished  without  the  aid  of  the  United  States 
Bank  or  its  branches. 

Smith  also  denied  that  the  notes  of  the  bank  formed  a 
universal  medium  throughout  the  country.  If  a  merchant 
in  New  York  wanted  to  remit  for  a  purchase  of  tobacco  in 
Richmond,  the  New  York  branch  could  not  aid  him,  but 


93 


N  a  t  ion  a  l  M  o  n  et  ar  y  Commission 


any  of  the  state  banks  there  would  give  him  a  draft  on 
Richmond.  Government  funds  would  be  transmitted  in 

the  same  way.  But  the  branch  banks  would  not  accept 

* 

the  paper  of  even  the  mother  bank.  Each  branch  was 
bound  only  to  receive  its  own  paper  and  not  that  either  of 
the  parent  or  any  other  branch.  Recently  the  Baltimore 
branch  had  been  called  upon  by  the  mother  bank  for 
specie.  The  branch  applied  to  the  Union  Bank,  which 
was  in  its  debt,  for  $50,000  specie.  The  Union  offered  to 
meet  the  balance  with  notes  of  the  mother  bank,  of  which 
it  held  $100,000,  but  the  branch  would  not  accept  them 
and  demanded  the  specie.  The  Union  was,  therefore, 
compelled  to  send  to  Philadelphia  for  payment  of  the 
notes  it  held  of  that  very  bank.  A  similar  transaction 
had  occurred  between  the  Mechanics’  Bank  of  New  York 
and  the  branch  in  that  place.  These  cases  showed  that 
the  paper  of  the  Bank  of  the  United  States  was  “not  a 
universal  medium,  not  even  payment  to  its  own  branches.” 
In  the  interior  the  paper  of  the  state  banks,  and  of  the 
state  banks  alone,  was  in  circulation.  Whether  this  were 
true  or  not,  it  is  certain  that  the  notes  of  no  state  bank 
possessed  to  anything  like  the  same  degree  the  quality  of 
universality.  One  member  declared  the  credit  of  any 
other  bank  in  the  country  would  be  outridden  in  twenty- 
four  hours. 

Testimony  as  to  the  impartiality  of  the  bank  in  granting 
loans,  irrespective  of  party,  was  submitted  both  in  com¬ 
mittee  and  in  Congress,  but  some  of  its  opponents  cited 
'  specific  cases  of  partiality  and  political  influence.  Wright, 
of  Maryland,  asserted  that  Philadelphia  merchants  had 
been  coerced  into  signing  petitions  to  ratify  Jay’s  treaty, 


94 


First  Bank  of  the  United  States 


against  their  convictions,  under  threat  by  the  bank  direct¬ 
ors  that  if  they  refused  they  could  get  no  more  accommo¬ 
dation  at  the  bank.  Directors  of  the  branch  bank  in 
Baltimore  had  been  dropped  from  the  directorate  because 
they  voted  for  General  Smith.  Evan  Jones,  who  had 
been  elected  president  of  the  branch  bank  at  New  Orleans 
to  succeed  a  Republican,  was  a  refugee  Tory  and  was  sus¬ 
pected  of  being  “one  of  Burr’s  chosen  band.”  Wright 
urged  that  “these  directors,  who  by  the  charter  have  the 
right  to  establish  as  many  branches  in  the  United  States 
as  they  please,  say,  one  to  each  State,  with  the  appointment 
of  13  directors,  a  president,  and  7  officers  to  each  branch, 
with  as  great  accommodations  as  directors,  and  salaries 
to  their  officers  averaging  $1,000  a  year  each,  making 
upward  of  $170,000  to  their  officers,  and  more  to  their 
directors,”  possessed  a  patronage  larger  than  that  of  the 
President  of  the  United  States.  “All  the  directors,”  he 
continued,  “of  the  mother  bank,  at  all  times,  have  been 
Federal  or  worse — many  of  them  Tories  or  Monarchists — 
so  that  being  under  such  control,  I  have  ever  doubted  the 
statement  of  its  funds.”  This  argument  was  met  by  the 
statement  that  an  examination  of  the  boards  of  the  state 
banks  would  show  that  Federalists  comprised  a  majority 
of  the  directors.  Lloyd,  of  Massachusetts,  testified  that, 
though  he  had  been  unceremoniously  dropped  from  the 
board  of  the  branch  bank  at  Boston  a  few  years  before, 
and  so  would  not  be  accused  of  cordiality  to  the  bank,  he 
freely  declared  that  from  a  personal  knowledge  of  the 
management  of  that  branch  it  was  impossible  for  “any 
moneyed  institution  to  be  conducted  with  more  correct¬ 
ness,  integrity,  and  impartiality.”  Smith,  of  Maryland, 


95 


N  at i o n a  l  M  o  n  et  ar  y  Commission 


read  correspondence  from  New  York  to  show  that  men 
employing  large  capital  in  importing  had  been  refused 
accommodation  by  the  branch  bank  there,  “whilst  the 
Manhattan  Bank  has  freely  discounted  the  paper  which 
the  branch  rejected  merely  by  reason  of  the  contamination 
of  passing  through  Republican  hands.”  In  Norfolk  the 
conduct  of  the  bank  had  never  been  considered  impartial. 
Smith  did  not  believe  the  statement  which  had  been  made 
that  the  Baltimore  branch  discounted  as  much  for  Republi¬ 
cans  as  for  Federalists.  He  said  also  that  for  two  sessions 
the  Bank  of  the  United  States  had  its  agents  in  Washing¬ 
ton,  intriguing  with  members  of  Congress  to  obtain  a 
renewal  of  its  charter. 

Another  member  (Rove)  belittled  the  evils  which  it 
had  been  said  would  attend  the  dissolution  of  the  bank. 
To  prove  their  unreality  he  cited  the  discounts  at  the 
Boston  and  New  York  branches.  At  Boston  the  loans  on 
a  capital  of  about  $700,000  amounted  to  about  $1,000,000. 
Of  these  loans  three-fourths  were  on  real  paper,  which 
any  bank  or  branch  would  be  glad  to  take.  There  re¬ 
mained  then  only  $250,000  “from  what  is  called  the 
standing  customers.”  The  United  States  Bank,  because 
of  the  advantages  the  government  deposits  gave  it, 
always  had  the  choice  of  customers.  Give  to  any  other 
bank  in  the  vicinity  these  deposits  and  they  would  be 
glad  to  take  those  customers  off  its  hands,  and  to  four 
times  the  amount  if  necessary.  New  York  had  loaned 
$4,175,000  on  a  capital  of  $1,800,000,  the  largest  propor¬ 
tion  of  any  of  the  branches.  This  had  been  done,  the  re¬ 
port  of  the  bank  to  the  contrary  notwithstanding,  on  the 
immense  deposits  of  revenue  collected  there.  Give  them 


96 


First  Bank  of  the  United  States 


to  the  state  banks  and  they  would  gladly  accommodate 
the  “constant  customers,  not  only  to  the  amount  of  one- 
fourth,  but  to  the  whole  $4,175,000.” 

Opponents  of  the  bank  admitted  that  its  fate  was  a 
party  question,  and,  since  the  Democrats  had  an  assured 
majority  in  Congress,  the  friends  to  renewal  recognized 
that  the  fate  of  the  bank  was  sealed.  Already  agents  of 
the  state  banks  were  in  Washington  fattening  on  the  pros¬ 
pects  of  receiving  government  deposits.  In  the  House  of 
Representatives  the  renewal  of  the  charter  was  indefi¬ 
nitely  postponed,  January  24,  i8n,bya  vote  of  65  to  64. 
The  vote  in  the  Senate,  February  20,  stood  17  to  17. 
Vice-President  Clinton,  an  enemy  to  both  Gallatin  and 
Madison,  cast  the  deciding  vote  against  renewal.  Thus 
perished  the  first  Bank  of  the  United  States. 

Temporary  Extension  Refused. 

After  the  final  rejection  of  the  bill  to  renew  the  charter, 
the  bank  memorialized  Congress  for  an  extension  of  two 
years  to  wind  up  its  affairs.  The  memorial  was  pre¬ 
sented  simultaneously  in  the  two  Houses,  February  25, 
1811,  and  was  referred  to  a  select  committee  in  each. 
Both  reported  against  any  extension.  Clay,  chairman 
of  the  Senate  committee,  reported  that  a  majority  held 
that,  since  the  Constitution  did  not  authorize  Congress 
originally  to  grant  the  charter,  any  extension  would  be 
equally  repugnant.  There  appeared  to  be  no  good  reason 
for  prolonging  its  political  existence  for  the  purpose  of 
settling  up  its  affairs.  A  trust  could  be  created  under 
existing  laws  by  which  liquidation  could  be  effected. 
The  committee  had  understood  that  the  apprehensions 


7069 — ia 


7 


97 


National  Monetary  Commission ■ 


as  to  the  distress  resulting  from  nonrenewal  had  not 
been  realized  in  Philadelphia.  The  paper  of  the  Bank 
of  the  United  States  was  returning  rapidly  and  the  notes 
of  the  state  banks  were  taking  its  place.  Their  ability 
to  enlarge  their  accommodations  would  be  increased  by 
receiving  the  deposits  held  by  the  Bank  of  the  United 
States.  The  injurious  effects  of  a  dissolution  would 
“consist  in  an  accelerated  disclosure  of  the  actual  con¬ 
dition  of  those  who  have  been  supported  by  the  credit 
of  others,  but  whose  insolvent  or  tottering  situation, 
known  to  the  bank,  has  been  concealed  from  the  public 
at  large.”  The  House  committee  made  a  similar  report 
unfavorable  to  extension. 

State  Charter  Refused. 

The  Bank  of  the  United  States  closed  its  doors  for 
business  on  the  afternoon  of  March  3,  1811,  and  trustees 
were  appointed  to  liquidate  its  affairs.  But  the  bank 
was  not  ready  to  give  up  its  existence.  The  trustees 
decided  to  petition  the  legislature  of  Pennsylvania  for 
a  state  charter.  On  March  14,  181 1,  they  sent  a  memorial 
to  the  legislature  praying  for  an  act  of  incorporation  for 
the  whole  amount  of  the  original  capital,  with  permis¬ 
sion  to  apply  to  other  States  for  the  privilege  of  estab¬ 
lishing  branches.0  The  memorial  urged  that  it  was 
impracticable  to  reduce  the  existing  capital  owing  to  the 
difficulty  of  discriminating  or  designating  the  stock  to 
be  retained.  Stress  was  laid  upon  the  almost  total  stag¬ 
nation  of  business  that  had  been  produced  by  the  failure 
of  Congress  to  renew  their  charter.  Great  sacrifices  of 

a  House  Journal  (Pa.),  March  18,  1811. 


98 


First  Bank  of  the  United  States 


property  were  being  made  to  support  individual  credit, 
money  rates  were  ruinously  high,  and  the  state  banks 
were  unable  to  meet  the  demand  for  loans.  It  was 
pointed  out  that  the  amount  of  capital  employed  by  the 
Bank  of  the  United  States  in  Pennsylvania  amounted  to 
about  a  half  of  the  total  banking  capital  in  the  country. 
The  withdrawal  of  so  large  a  proportion  of  capital  would 
be  disastrous.  One  of  the  newspapers  urged  that  if  Penn¬ 
sylvania  did  not  “seize  the  opportunity  of  continuing 
that  truly  useful  bank  New  York  surely  would.”0  It 
was  reported  that  the  bank  offered  to  pay  the  State  a 
bonus  of  $40,000  a  year  for  a  charter. 

This  application  was  defeated,  but  was  renewed  in  the 
next  legislature.  A  second  memorial,  signed  by  David 
Lenox,  president  of  the  board  of  trustees,  December  7, 
1811,  was  sent  to  the  legislature,  and  a  strong  lobby  was 
maintained  in  Harrisburg.  The  memorial  stated  that 
though  the  bank  had  stopped  all  banking  operations, 
they  had  continued  “their  exertions  for  the  preserva¬ 
tion  of  credit.”  They  had  authorized  the  trustees,  in 
making  collections,  “to  require  payment  of  but  small 
portions  at  a  time,  and  to  receive  new  securities  from 
their  debtors  for  the  residue.”  Only  a  part  of  these  loans 
had  been  called  in;  the  worst  was  yet  to  come  if  liquida¬ 
tion  had  to  continue.  Already  considerable  distress  pre¬ 
vailed,  business  was  stagnant,  and  bankruptcies  frequent. 
Had  the  bank  been  in  a  position  to  come  forward  with 
aid,  as  it  had  done  in  former  times  of  depression,  much 
of  the  distress  could  have  been  averted.  The  petition 
urged  that  a  large  part  of  the  stock  was  held  by  citizens 

0  Daily  Advertiser,  March  23,  1811. 


99 


National  Monetary  Commission 


and  institutions  of  Pennsylvania.  The  foreign  holdings, 
which  had  lately  been  considerably  diminished,  should  not 
weaken  the  claim  of  citizens  to  legislative  favor.  The 
constitutional  question  which  came  up  in  connection 
with  the  federal  charter  could  not  arise  in  a  state  charter. 
If  Pennsylvania  refused  a  charter  the  trustees  must 
secure  it  from  some  other  state  or  states.®  The 
trustees  offered  a  cash  bonus  of  $500,000,  to  aid  certain 
specified  public  works,  for  a  twenty-year  charter  of  a 
bank  with  $5,000,000  capital,  or  proportionate  amounts 
for  any  capital  of  $3,000,000  or  upward.  In  addition, 
they  offered  to  loan  the  State  any  time  during  the  twenty 
years  $500,000  at  5  per  cent  for  internal  improvements. 6 
These  liberal  offers  were  all  refused.  Their  very  lib¬ 
erality  accomplished  their  defeat.  The  feeling  spread 
that  to  warrant  such  bids  the  profits  of  the  banking 
business  must  be  enormous,  and  that  they  ought  to  be 
enjoyed  not  by  one  large  bank  alone  but  by  many  small 
ones. 

Charter  Granted  to  New  York  Stockholders. 

In  the  spring  of  1812  the  stockholders  applied  to  the 
New  York  legislature  for  a  charter  for  a  bank  to  be  es¬ 
tablished  in  New  York  City,  to  be  called  the  Bank 
of  America.  Charges  of  bribery  and  corruption  were 
rife  while  the  bill  was  under  discussion  in  the  house, 
and  to  prevent  its  passage  in  the  senate  Governor  Tomp¬ 
kins  prorogued  the  legislature  March  27,  1812,  for  a 
period  of  sixty  days  “  to  give  time  for  reflection.”  When 
the  legislature  assembled  again  a  bitter  struggle  ensued 

a  Ibid.,  December  30,  1811.  &  House  Journal  (Pa.),  181 1-12,  p.  302. 


100 


First  Bank  of  the  United  States 


over  the  bill,  but  it  finally  passed  by  a  vote  of  16  to  15 
on  June  2,  1812.  Under  the  terms  of  the  charter  the 
Bank  of  America  was  to  have  a  capital  of  $6,000,000, 
consisting  of  $5,000,000  of  the  stock  of  the  Bank  of  the 
United  States  and  $1,000,000  in  cash,  subscriptions 
to  which  were  not  open  to  stockholders  of  the  bank. 
For  every  share  in  the  late  Bank  of  the  United  States 
stockholders  were  entitled  to  subscribe  four  shares  of 
the  new  institution.  Dividends  on  shares  of  the  Bank 
of  the  United  States  were  to  be  collected  free  of  expense 
and  applied  to  subscriptions  in  the  Bank  of  America. 
If  the  sale  of  the  United  States  Bank  stock  produced 
more  than  par,  $400,  the  surplus  was  to  be  refunded 
to  subscribers;  if  less,  subscribers  would  be  required 
to  pay  the  deficiency  in  money  with  interest  at  6  per 
cent.  The  bank  was  to  pay  $400,000  to  the  State, 
and  was  bound  to  loan  the  State  at  any  time  $2,000,000, 
one  half  at  5  per  cent,  the  other  half  at  6.a  Subscrip¬ 
tion  books  were  opened  in  10  States,  from  June  6  to 
August  26.  Oliver  Wolcott,  former  Secretary  of  the 
Treasury,  was  made  president,  and  Jonathan  Burrall, 
former  cashier  of  the  New  York  branch  of  the  Bank 
of  the  United  States,  cashier  of  the  new  concern.  The 
bonus  and  the  loans  to  the  State  required  by  the  char¬ 
ter  were  subsequently  remitted  on  the  stipulation  that 
the  capital  should  be  reduced  to  $4,000,000  and  then 
to  $2,000,000. 6 

a  The  Merchants’  National  Bank  (New  York),  p.  89. 

b  Ibid. ;  advertisement  in  United  States  Gazette,  April  15,  1812. 


101 


Na  t  ion  a  l  M  on  et  ar  y  Commission 


Girard’s  Bank. 

When  the  charter  of  the  Bank  of  the  United  States 
expired  in  1811,  Stephen  Girard,  then  the  foremost  mer¬ 
chant  and  the  wealthiest  man  in  the  country,  was  the 
largest  stockholder.  Believing  that  the  commercial  and 
financial  interests  of  the  country  would  compel  Congress 
to  renew  the  charter,  he  had  bought  bank  stock  heavily 
both  at  home  and  abroad.  Girard’s  purchases  of  foreign 
holdings  came  about  in  this  way.  For  years  the  proceeds 
of  his  extensive  shipments  to  Europe  had  been  collected 
through  the  Barings,  of  London,  against  whom  he  drew 
from  time  to  time.  On  December  31,  1809,  his  balance 
with  the  Barings  amounted  to  £116,701,  and  he  in¬ 
structed  them  to  invest  his  funds  in  shares  of  the  Bank 
of  the  United  States.  His  orders  were  not  carried  out 
until  the  following  year,  when  he  sent  a  special  agent 
to  London,  who  purchased  over  a  half  million  of  stock 
at  a  figure  considerably  below  the  market  of  the  year 
before.  In  18 11  the  indebtedness  of  the  Barings  to 
Girard  amounted  to  nearly  $1,000,000.  The  war  between 
England  and  France  made  trade  with  Europe  increas¬ 
ingly  hazardous,  and  the  Barings  were  on  the  verge 
of  bankruptcy,  so  Girard  sent  two  agents  to  London  to 
extricate  his  immense  funds  from  their  hands.  Part  of 
the  funds  were  invested  in  British  goods,  part  in  Amer¬ 
ican  6  per  cent  stocks,  and  part  in  United  States  Bank 
shares,  then  at  about  $430^8- a  It  is  said  that  Girard’s 
purchases  of  foreign  holdings  cost  him  in  all  $1,800,000. 6 
Had  the  charter  of  the  bank  been  renewed  as  he  expected, 

0  Simpson,  Life  of  Girard,  p.  99. 

b  Leach,  History  of  the  Girard  National  Bank,  p.  19. 


102 


First  Bank  of  the  United  States 

Girard’s  profits  upon  this  speculation  would  have  netted 
him  a  fortune.  In  view  of  his  very  large  holdings  of 
the  bank’s  stock,  it  might  be  easy  to  account  for  Girard’s 
espousal  of  recharter  on  the  ground  of  self-interest. 
Renewal  would  have  materially  enhanced  the  value 
of  bank  stock.  But,  though  a  strict  Republican,  Girard 
believed  in  the  constitutionality  of  the  bank,  and,  hav¬ 
ing  been  one  of  the  largest  borrowers,  none  knew  better 
than  he  of  its  expediency  and  benefits  to  trade. 

When  renewal  was  denied  by  the  federal  authorities, 
Girard  was  active  in  the  support  of  the  movement  for  a 
state  charter.  *  This  project  having  failed,  he  decided  to 
establish  a  private  bank  of  his  own,  thus  becoming  the 
foremost  banker,  as  he  was  the  foremost  merchant,  of 
the  country.  George  Simpson,  who  had  been  for  seven¬ 
teen  years  the  cashier,  and,  apparently,  the  real  head, 
of  the  Bank  of  the  United  States  was  engaged  to  organize 
the  bank,  and  when  the  work  was  completed  Girard  put 
him  in  charge  as  cashier  and  manager.  He  purchased 
the  bank  building  and  the  cashier’s  house  for  $120,000, 
less  than  a  third  of  their  cost,  and  on  May  12,  1812,  he 
opened  his  banking  house,  with  a  capital  of  $1,200,000. 
On  the  1st  of  January,  1813,  the  capital  was  increased  to 
$1,300,000.  The  business  of  the  trustees  of  the  Bank 
of  the  United  States  was  immediately  transferred  to 
Girard’s  bank,  together  with  $5,000,000  in  specie.  The 
officers  and  clerks  of  the  old  bank  were  retained  at  the 
same  salaries.  Most  of  the  customers  of  the  Bank  of  the 
United  States  opened  accounts  with  Girard’s  bank,  wnich 
also  retained  a  large  part  of  the  custom-house  business.0 

a  Simpson,  Life  of  Girard,  p.  1 1 1. 


103 


National  Monetary  Commission 


Girard  did  not  use  the  notes  of  the  old  bank,  but  paid 
out  the  notes  of  state  banks  until  his  own  were  ready. 
These  bore  the  device  of  an  American  eagle  and  a  ship 
under  full  sail.  They  were  signed  by  Girard  and  counter¬ 
signed  by  his  cashier,  and,  though  some  of  the  banks 
at  first  refused  to  accept  them,  they  finally  came  to  be 
accepted  as  freely  as  other  bank  notes.  Redemption  in 
specie  was  never .  refused.  To  give  to  his  bank  some¬ 
thing  of  the  permanence  of  an  incorporated  institution, 
and  to  insure  to  depositors  prompt  payment  in  the  event 
of  his  death,  Girard  executed  a  deed  of  trust  vesting  in 
five  prominent  citizens  all  the  property  of ‘the  bank.0 

Undoubtedly  the  prompt  establishment  of  Girard’s 
bank  did  much  to  lessen  the  business  distress  which 
otherwise  must  have  resulted  from  the  liquidation  of 
the  Bank  of  the  United  States.  It  rendered  in¬ 
valuable  aid  to  the  Government  in  the  financial  diffi¬ 
culties  of  the  next  few  years.  “Girard’s  bank  was  the 
very  right  hand  of  the  national  credit,  for  when  other 
banks  were  contracting,  it  was  Girard  who  stayed  the 
panic  by  a  timely  and  liberal  expansion,  and  frequent 
were  the  calls  made  upon  him  by  the  Government  for 
temporary  loans,  which  calls  were  invariably  responded 
to  immediately.  ” 6 

Girard’s  bank  continued  in  successful  operation  until 
his  death,  December  26,  1831,  when  the  trustees  wound 
up  its  affairs,  turning  over  to  the  executors  money, 
securities,  and  property  to  the  value  of  more  than  $4,000,- 
000.  To  occupy  the  field  made  vacant  by  the  liquidation 
of  Girard’s  bank,  a  group  of  capitalists  organized  a  bank, 

°  Leach,  History  of  the  Girard  National  Bank,  p.  20.  6  Ibid.,  p.  24. 


104 


First  Bank  of  the  United  States 


called  the  “Girard  Bank,”  and  secured  a  state  charter  in 
1832.  It  continued  as  a  state  institution  until  1865, 
when  it  entered  the  national  banking  system. 

t 

Fiscal  Operations  after  Dissolution  of  Bank. 

As  soon  as  it  was  ascertained  that  the  charter  of  the 
Bank  of  the  United  States  would  not  be  renewed,  Gallatin 
instructed  the  collectors  of  all  the  leading  ports  to  stop 
depositing  custom-house  bonds  for  collection  in  the  bank, 
to  withdraw  those  falling  due  after  March  3,  1811,  and 
thereafter  to  deposit  the  bonds  in  state  banks.  The 
only  condition  imposed  upon  these  depositories  was  that 
they  should  give  a  preference  in  discounts  to  those  having 
duty  bonds  to  pay.  The  public  deposits  in  the  Bank  of 
the  United  States  were  gradually  withdrawn,  and  the 
government  account  was  closed  September  2,  1811, 
with  the  exception  of  a  balance  of  $70,000  in  the  New 
Orleans  branch,  for  which  a  credit  had  been  given  some 
months  before  to  the  agents  of  the  War  and  Navy  De¬ 
partments  and  which  had  not  yet  been  drawn  upon.  By 
this  time  the  government  deposits  were  divided  among  21 
banks.  In  December,  1811,  Gallatin  reported  that  there 
had  been  no  difficulty  in  the  transmission  of  public 
money,  and  that  with  the  exception  of  Norfolk  and  Sa¬ 
vannah  the  revenue  had  been  as  well  collected  as  under  1 
the  Bank  of  the  United  States.  a 

In  his  report,  January  23,  1811,  Gallatin  expressed  a 
doubt  whether,  in  the  event  of  the  dissolution  of  the  bank, 
its  notes  would  continue  to  be  receivable  in  payments  to 
the  United  States.  He  suggested  the  propriety  of  some 

<*  Finance,  Vol.  II,  pp.  516-522. 

105 


Na  t  ion  a  l  M  o  n  et  a  r  y  Commission 


legislation  which  would  remove  all  doubt  on  the  subject. 
Congress  took  no  action  on  the  question,  but  Gallatin 
instructed  the  collectors  and  receivers  of  public  money 
not  to  accept  any  which  the  bank  refused  to  take  from 
the  Government,  or  which  they  could  not  conveniently 
redeem.  The  circuit  court  of  Virginia,  however,  had 
recently  decided  that  the  notes  of  the  bank  were  every¬ 
where  a  legal  tender  in  payment  of  duties.  Inasmuch  as 
a  considerable  amount  of  the  notes  of  the  New  Orleans, 
Savannah,  and  Charleston  branches  was  outstanding 
and  would  be  forced  on  the  Treasury  at  considerable  risk 
and  expense  to  collect,  Gallatin  urged  the  immediate 
repeal  of  that  part  of  the  law  which,  according  to  the 
recent  decision,  was  considered  as  being  in  force.  Accord¬ 
ingly,  on  March  19,  1812,  Congress  passed  an  act  repeal¬ 
ing  the  section  of  the  bank  act  providing  that  notes  of 
the  Bank  of  the  United  States  were  legal  tender  in  pay¬ 
ment  to  the  United  States.  By  the  act  of  June  30,  1812, 
treasury  notes  were  made  legal  tender  to  the  Government. 

Seybert  states  that  on  March  4,  1816,  there  were  still 
$217,160  of  United  States  Bank  notes  outstanding,  of 
which  many  had  been  destroyed  or  lost.0  In  1823  the 
amount  of  notes  still  unpresented  was  $205,000.  By 
decree  of  the  court  the  trustees  were  then  released  from 
further  obligation  to  redeem  outstanding  notes.  A  fund 
of  $5,000  was  reserved  to  meet  cases  of  peculiar  hardship. 
Up  to  1839  the  whole  amount  presented  for  redemption 
was  about  $1,100,  most  of  which  had  been  in  the  hands 
of  an  invalid  Revolutionary  soldier.  Niles  reports  the 
redemption  of  a  $10  note  in  1839. b 

a Statistical  Annals  (1818).  b  Niles  Register,  Vol.  LVI,  p.  273. 


106 


First  Bank  of  the  United  States 


Liquidation. 

% 

The  work  of  liquidating  the  bank  was  carried  on  with 
considerable  dispatch  and  without  the  dire  financial  dis¬ 
turbances  apprehended. 

The  following  table  shows  the  progress  of  liquidation  in 
the  first  year  after  dissolution : a 


Jan.  1,  1811. 

Mar.  1,  1811. 

Sept.  1,  1 81 1 

Mar.  1,  1812. 

Loans  and  discounts _ 

$17. 759.001 

$14, 587, 134 

$7, 152, 786 

$ 3 . 792. 795 

Specie __  _  .  _ 

5.317, 885 

4. 835, 702 

4,500.527 

6, 116, 776 

Public  deposits _ 

6, 474, 402 

2. 874. 833 

322, 349 

81,517 

Private  deposits _ 

3. 855, 402 

3.583.596 

448, 112 

223, 442 

Notes  in  circulation _ 

6, 070. 153 

6,552. 875 

2, 963, 209 

1, 070, 459 

Thus  it  appears  that  in  the  first  six  months  of  liqui¬ 
dation  the  bank  collected  over  $7,000,000  of  its  loans 
and  discounts;  paid  off  practically  all  of  its  public  and 
private  deposits;  and  redeemed  $3,600,000  of  its  bank 
notes,  yet  its  stock  of  specie  fell  only  $335,175.  In  the 
first  year  it  paid  over  $11,600,000,  and  its  specie  increased 
nearly  $1,300,000.  The  discounts  were  reduced  nearly 
$10,000,000  and  the  circulating  notes  $6,500,000. 

On  June  1,  1812,  the  trustees  declared  a  dividend  of  70 
per  cent  of  the  capital.  Stockholders  in  the  States  where 
branches  had  been  established  were  paid  by  draft  on  the 
respective  branches.  All  others  were  paid  at  Philadel¬ 
phia.* *  6  October  1,  1812,  another  dividend  of  18  per  cent 
was  paid,  and  a  third  one  of  7  per  cent  on  April  1,  1813, 
making  95  per  cent  within  about  two  years  after  dissolu- 
tion.  Subsequent  dividends  were  paid  as  follows :  Five  per 

°  Minority  report  (Ways  and  Means  Committee)  on  Renewal  of  the 

Deposits,  March  4,  1834,  23d  Cong.,  1st  sess.,  No.  313. 

6  Advertisement,  United  States  Gazette,  April  15,  1812. 

107 


Na  t  ion  al  M  on  et  ary  Commission 


cent,  April  3,  1815;  4  per  cent  in  1817;  per  cent  in 
1820;  2]/a  per  cent  in  1823;  X  per  cent  in  1830;  %  percent 
in  1834,  making  a  total  of  109  per  cent  on  the  original 
capital.  Raguet  calculated  that  if  these  dividends,  made 
at  such  long  intervals,  were  regarded  as  deferred  pay¬ 
ments,  compounded  semiannually,  the  actual  return  to 
stockholders  was  only  97  per  cent  on  the  day  the  charter 
expired.0  Some  years  before  the  stock  had  sold  at  156. 

In  1834  the  city  councils  of  Philadelphia  appointed  a 
committee  to  determine  the  best  way  to  close  the  trust 
of  the  old  bank  in  order  to  get  possession  of  the  house 
which  had  been  willed  to  the  city  by  Girard,  but  which 
was  still  occupied,  rent  free,  by  “the  late  cashier  of 
Girard’s  Bank.*’  The  committee  brought  in  a  report 
February  12,  1835,  showing  that  on  June  25,  1812,  Girard 
had  executed  a  lease  to  the  trustees  of  the  old  bank  of 
parts  of  the  bank  and  the  cashier’s  dwelling  until  the 
affairs  of  the  bank  should  be  closed.  The  bank  building 
had  already  passed  to  the  city  and  was  leased  to  the 
Girard  Bank.  Finding  that  possession  of  the  dwelling 
depended  upon  the  closing  up  of  the  trust,  the  committee 
procured  a  copy  of  the  most  recent  statement  of  the  trus¬ 
tees.  This  showed  $22,564  still  in  the  hands  of  the  trus¬ 
tees,  after  a  recent  dividend  of  $51,250.  There  were  still 
several  debts  due  from  estates  in  the  hands  of  assignees. 
It  was  thought  that  most  of  the  $22,564  had  been  in  the 
hands  of  the  trustees  unclaimed  for  nearly  twenty  years 
and  that  it  would  be  difficult  to  reach  those  entitled  to  it. 
The  unclaimed  balance  would  be  increased  by  every  suc- 

a  Gouge,  Journal  of  Banking,  p.  239. 


108 


First  B  ank  of  the  United  States 


cessive  dividend  and  the  trust  would  be  protracted  indefi¬ 
nitely.  The  committee,  therefore,  recommended  that  the 
city  take  over  the  trust  and  have  it  administered  by  the 
commissioners  of  the  Girard  estate. 


Consequences  of  Dissolution. 

Although  the  failure  to  renew  the  charter  of  the  Bank 
of  the  United  States  was  not  followed  immediately  by  the 
train  of  dire  disasters  predicted  by  its  friends,  the  march 
of  events  was  soon  to  bring  the  country  and  the  Govern¬ 
ment  to  the  edge  of  bankruptcy,  which  the  perpetuation 
of  the  bank  might  have  averted.  No  higher  authority 
than  Gallatin’s  need  be  presented  upon  this  point. 
Writing  in  1831,  he  said:  “The  dissolution  of  the  Bank  of 
the  United  States  deprived  the  country  of  a  foreign  capi¬ 
tal  of  over  $7,000,000,  which  was  remitted  abroad  during 
the  year  that  preceded  the  war.  At  the  same  time  the 
state  banks  had  taken  up  a  considerable  part  of  the  paper 
formerly  discounted  by  that  of  the  United  States.  As  the 
amount  of  this  exceeded  $15,000,000,  their  aid  was  abso¬ 
lutely  necessary  in  order  to  prevent  the  great  distress 
which  must  have  otherwise  attended  such  diminution  of 
the  usual  accommodations.  The  creation  of  new  state 
banks  to  fill  the  chasm  was  a  natural  consequence.  The 
expectation  of  great  profits  gave  birth  to  a  much  greater 
number  than  was  wanted.  *  *  *  From  January  1, 

1811,  to  January^,  1815,  120  new  banks  went  into  opera¬ 
tion,  with  a  capital  of  $40,000,000,  adding  about  $30,000,- 
000  to  the  banking  capital  of  the  country.  *  *  * 

And  as  the  salutary  regulating  power  of  the  Bank  of  the 


109 


Na  t  ion  a  l  Monetary  Commission 


United  States  no  longer  existed,  the  issues  were  increased 
beyond  what  was  necessary.”  a 

Gallatin  made  the  following  estimate  of  the  banking 
facilities  at  the  dates  mentioned: 


Year. 

Capital. 

Notes  in  cir¬ 
culation. 

Specie. 

Bank  of  the  United  States _ 

1 

J $10,  000,  000 
{  42,610,601 

$5,400, 000 

22, 700, 000 

$5, 800, 000 
9, 600, 000 

88  state  banks.  _ 

1811 

208  state  banks _ 

1815 

1816 

52, 610, 601 
82, 259, 590 
89, 822, 422 

28, 100, 000 

45, 500, 000 

68, 000, 000 

15 , 400, 000 

17, 000, 000 

19, 000, 000 

246  state  banks _ 

The  Government  was  compelled  to  rely  upon  the  state 
banks  for  aid  during  the  war  of  1812,  and  their  universal 
suspension  of  specie  payments  in  1814  almost  paralyzed 
the  operations  of  the  Treasury.  The  notes  of  the  state 
banks  did  not  pass  current  out  of  their  own  locality,  and 
it  became  impossible  to  make  transfers  of  funds,  public 
or  private,  from  one  part  of  the  country  to  another.  In 
the  essay  quoted  above,  Gallatin  expressed  his  deliberate 
opinion  that  the  suspension  of  specie  payments  might  have 
been  prevented  if  the  Bank  of  the  United  States  had  still 
been  in  existence.  He  believed  that  the  enormous  in¬ 
crease  of  banks  occasioned  by  the  dissolution  of  the  bank 
would  not  have  occurred.  That  bank  would  have  re¬ 
strained  their  issues  within  proper  bounds,  and,  “  through 
the  means  of  its  offices,  it  would  have  been  in  possession 
of  the  earliest  symptoms  of  approaching  danger.  .  It 
would  have  put  the  Treasury  Department  on  its  guard; 
both  acting  in  concert  would  certainly  have  been  able  at 
least  to  retard  the  event;  and,  as  the  treaty  of  peace  was 


0  Writings,  Vol.  Ill,  p.  284. 


IIO 


Ft  rst  Bank  of  the  United  States 


ratified  within  less  than  six  months  after  the  suspension 
took  place,  that  catastrophe  would  have  been  altogether 
avoided.’  ’ 

Bank  Reports. 

In  the  early  days  of  banking  a  veil  of  mystery  was 
thrown  over  the  operations  of  banks,  and  the  general 
public  knew  but  little  of  their  nature  or  modus  operandi.  / 
Even  the  Bank  of  the  United  States,  semipublic  institution 
though  it  was,  published  no  reports.  Under  the  terms  of 
its  charter  it  was  required  to  make  reports  of  condition  to 
the  Secretary  of  the  Treasury  when  called  for,  but  not 
oftener  than  once  a  week.  There  is  indisputable  evidence 
that  reports  were  made  regularly,  but  they  were  not 
given  to  the  public.0  In  the  debates  of  181 1 ,  after  twenty 
years  of  the  bank’s  contact  with  the  public  and  the 
Government,  the  statement  was  made,  and  passed  unchal¬ 
lenged,  that  “the  nature  of  the  loans,  the  deposits,  and  all 
the  bargains,  dealings,  and  contrivances  between  the 
Government  and  the  bank  are  wholly  invisible  to  the 
public.”  Even  those  friendly  to  the  bank,  and  eager  to 
defend  it,  were  unable  to  procure  the  facts  and  figures 
necessary  for  an  adequate  defense.6 

The  Treasury  officials,  during  the  entire  time  of  its 
existence,  gave  out  no  statement  of  its  affairs  except  when 
Congress  called  for  information.  Unfortunately,  only  two 
reports  of  resources  and  liabilities  have  been  preserved. 

A  careful  search  has  failed  to  reveal  any  trace  of  the 
original  books  and  records  of  the  bank.  The  two  sur¬ 
viving  reports  on  the  bank  were  made  to  Congress  by 

o  See  Appendix  E.  b  See  p.  84. 


hi 


National  M  on  et  ary  Commission 


Gallatin,  one  in  1809,  the  other  in  1811,  while  Congress 
was  considering  the  bank’s  petition  for  a  renewal  of  its 
chapter. 

The  financial  statement  of  the  bank’s  condition  in 
January,  1809,  as  stated  in  Gallatin’s  report  of  March  3, 
1809,  gives  the  actual  amount  of  public  stock,  real  estate, 
and  undivided  surplus,  but  loans,  deposits,  specie  and 
notes  are  “average”  amounts.  The  amount  of  specie  on 
hand  and  the  deposits  at  the  time  of  this  report  were 
actually  several  million  dollars  in  excess  of  this  “averaged 
statement,”  both  having  been  increased  considerably 
above  normal  amounts  by  the  embargo  and  by  the  unusu¬ 
ally  large  Treasury  balance  which  was  principally  on  de¬ 
posit  in  the  bank. 


Financial  statement  of  Bank  of  United  States. 


January,  1809. a 

January,  1811.6 

RESOURCES. 

Loans  and  discounts _ 

$15 , 000, 000 

2, 230, 000 

$14. 578, 294 
2, 750, 000 

57.046 
894. 145 
500.653 

393.341 
5.009, 567 

United  States  6  per  cent  stock  _  __ 

Other  United  States  indebtedness _ _ 

Due  from  other  banks _ _ _ 

800, 000 
480, 000 

Real  estate _ _ 

Notes  of  other  banks  on  hand _ 

Specie _  _ 

5 , 000, 000 

Total _  _  _ _ 

23,510, 000 

24, 183,046 

LIABILITIES. 

Capital  stock _ 

10, 000, 000 

510, 000 

4, 500, 000 

8, 500, 000 

10, 000, 000 

509,678 
5.037. 125 

5,900,433 

1.929,999 

634.348 

171.473 

Undivided  surplus _  _ 

Circulating  notes  outstanding _  _ _ _ 

Individual  deposits _ _ _  _  _ 

United  States  deposits _ 

Due  to  other  banks _  _  _ _ _ 

Unpaid  drafts  outstanding _ 

Total _ _ _ 

23, 510, 000 

24, 183,046 

. 

°  Finance,  Vol.  II,  p.  352.  &  See  p.  112. 


1 1 2 


First  Bank  of  the  United  States 


The  balance  of  $510,000,  the  amount  of  undivided 
profits,  commonly  called  the  “contingent  fund,  ’’was 
reserved  “to  cover  losses  which  may  arise  from  bad  debts 
or  other  contingencies,  and  for  extra  dividends.”  Com¬ 
menting  upon  this  statement,  Gallatin  says:  “The  affairs 
of  the  bank,  considered  as  a  moneyed  institution,  have 
been  wisely  and  skillfully  managed.”® 

In  obedience  to  a  House  resolution,  Gallatin  submitted 
a  statement,  January  9,  181 1,  of  debts  due  the  Bank  of  the 
United  States  by  individuals  and  by  other  banks,  of  the 
amount  of  notes  of  the  bank  and  its  branches  in  circula¬ 
tion,  and  of  the  Treasury  cash  in  the  different  deposi¬ 
tories.5  Gallatin  notes  again  that  the  only  statements 
which  the  Treasury  could  require  of  the  bank,  under  the 
act  of  incorporation,  were  the  amount  of  capital  stock, 
debts  due  the  bank,  deposits,  notes  in  circulation,  and 
cash  on  hand.  He  had  no  right  to  ask  for  the  accounts 
of  private  individuals  or  for  any  other  than  these  general 
statements.  The  bank  statement  is  as  follows: 


a  Report  to  Senate,  March  3,  1809,  Finance,  Vol.  II,  p.  352. 
b  Ibid.,  p.  460. 


7069 — 10 - 8 


«3 


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■  - 

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. 


«■  . 


A. — Debts  due  by  indidviuals  and  banks. 


Due  by  individuals. 

Due  by  banks. 

Date. 

Bills  and  notes 
discounted. 

Bills  and  notes 
in  suit. 

Bonds. 

Total. 

Deposited  in 
other  banks. 

Due  to  other 
banks. 

Balance  due  by 
other  banks. 

Bank  notes  of 
other  banks  on 
hand. 

Jan. 

Dec. 

Dec. 

Dec. 

Dec. 

Dec. 

Dec. 

t  t8tt 

$5. 123,690. 00 

1 . 306, 366. 88 
4, 068, 625. 01 

1 , 100, 265 . 04 
390, 911. 64 

674. 997- 20 

$5, 123, 690. 00 

$175, 766. 00 

$28, 982. 00 

$146, 784.  00 

$191, 895. 00 

97  T^TO 

1 , 306, 368. 88 

4, 140, 125. 01 

1 , 100, 265 . 04 

320, 000. 00 

142, 000.  00 

178, 000. 00 

26,  750. 00 

29, 1810 
29, 1810 

29. 1810 

22. 1810 

15. 1810 

15. 1810 

24. 1810 

$71, 500. 00 

480, 504. 00 

383. 543 ■ 72 

480, 504. 00 

New  York  _ 

193,067.  51 

190  476. 2 1 

71,  13 x. 66 

$21, 982. 20 

412, 893. 84 

160, 426.  06 

3. 057- 03 

157. 369- 03 

31,  142.  40 

43. 118. 34 
89, 063 . 62 

718,  H5-54 
950, 309. 40 

70, 156. 26 

70, 156. 26 

31, 890.  00 

in  onoiiv - 

Charleston _ _ 

149, 929. 86 

73 , 000. 00 

73 , 000. 00 

in,  240.  00 

711,315.92 

Dec. 

Nov. 

772, 729. 48 
601, 689. 85 

772, 729. 48 
601 , 689. 85 

23. 095. 00 

Savannah  _  _  _  _ -  - 

New  Orleans - 

l 

21,  734.  00 

21,  734-  79 

24, 765.00 

Total 

14, 750, 593-02 

154, 164. 16 

221, 429. 86 

15, 126, 187. 04 

1, 685, 130. 83 

367, 106.  54 

1,318, 024. 29 

511, 909. 06 

— 

— 

Bills  and  notes  discounted,  and  bonds  due  by  individuals,  as  above  . 

Balance  due  by  other  banks - 

Bank  notes  of  other  banks  on  hand - 

Overdrawn  by  commissioners  of  loans  (circumstances  not  explained) 

Treasury  drafts  on  collectors  and  other  banks  not  yet  collected - 

Converted  6  per  cent  stock,  as  per  Treasury  books - 


$iS, 126, 187. 04 
1, 318, 024. 29 

511. 909- 06 

32, 579- 07 
31, 446. 01 
23,066. 23 


17, 043, 231. 70 
2, 750, 000. 00 


Loan  to  the  United  States,  December  31,  1810 

7069.  (To  follow  page  113.) 


19. 793. 231. 70 


- 


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First  Bank  of  the  United  States 


B. — Notes  in  circulation. 


Date. 

Issued. 

On  hand. 

In  circulation. 

Philadelphia _ 

Jan. 

1, 18x1 

$1. 708, 013 

$101, 750. 00 

$1, 606,  263. 00 

Boston _ 

Dec. 

22, 1810 

45i. 435 

207, 036. 34 

244, 398. 66 

New  York _ 

Dec. 

29, 1810 

1,  223,300 

179, 421. 00 

1, 043, 879. 00 

Baltimore _ 

Dec. 

29, 1810 

386, 505 

216, 855. 00 

169, 650. 00 

Washington _ 

Dec. 

29, 1810 

288, 880 

33,  114. 83 

255. 765. 17 

Norfolk _ 

Dec. 

22, 1810 

300, 140 

77, 922. 00 

222, 218. 00 

Charleston _ 

Dec. 

15, 1810 

792,565 

3, 850. 00 

788, 715. 00 

Savannah.  _ 

Dec. 

15. 18x0 

850, 800 

216, 450. 00 

634. 35°. 00 

New  Orleans _ 

Nov. 

24, 1810 

192, 140 

192, 140. 00 

Total _ _ 

6, 193. 778 

1, 036, 399. 17 

5- 157,378. 83 

C. — Government  deposits  in  various  banks ,  January  7,  1811. 


Bank  of  the  United  States  (Philadelphia) 
Office  of  discount  and  deposit  at — 

Boston _ 

New  York _ 

Baltimore _ 

Washington _ _ 

Norfolk _ 

Charleston _ 

Savannah _ 

New  Orleans _ 

Bank  of — 

Maine,  (Portland) _ 

Saco _ 

Newport. - - 

Roger  Williams  (Providence) _ 

Manhattan  (New  York) _ 

Pennsylvania  (Philadelphia) _ 

(Pittsburg  branch) _ 

Marietta _ 

Kentucky  (Frankfort) _ 

Columbia  (Georgetown) - 

Alexandria _ 


<* *$161, 557.  64 

0336,  264.  77 
a 5Si. 988. 51 
°  272, 293. 77 
^65,  776.  42 
a  14, 006.  36 
a 29, 084. 99 
a 46, 841. 63 
a  166, 701. 55 

b  37. 392. 38 
b  26, 409. 53 
b3 4.  843.49 
6 43. 382. 79 
c  188, 670.  32 
d 92 , 628. 1 7 
d  137,  442.  n 
p 11. 242. 25 
d  75. 137- 88 
e  115,080. 15 
/ 86, 91 7 . 90 


While  the  debate  on  renewal  was  in  progress  in  the 
House,  Gallatin  was  requested  to  submit  a  statement  giv- 


o  The  collectors  of  Philadelphia,  New  York,  etc.,  were  directed  by  act  of  May  10,  1800  to 
deposit  for  collection  in  the  Bank  of  the  United  States  or  one  of  its  branches  all  revenue 
bonds. 

b  The  deposits  in  these  banks  arose  from  payments  made  by  several  collectors  in  Maine 
and  Rhode  Island. 

c  This  deposit  arose  from  occasional  collections  of  surplus  revenue  in  Rhode  Island  and 
Connecticut. 

d  Deposits  by  receivers  of  public  moneys  on  account  of  sales  of  public  lands. 

*  This  deposit  due  to  occasional  drafts  on  some  collectors  in  Virginia,  and  from  the 
receipt  of  moneys  paid  at  the  treasury  for  lands,  patents,  etc. 

/  Due  to  payments  made  by  the  collector  at  Alexandria. 

*15 


Na  t  ion  a  l  Monetary  Commission 


ing  a  list  of  the  directors  of  the  bank  and  its  branches,  the 
amount  of  stock  held  by  foreigners  and  by  citizens,  and 
the  amount  of  specie  on  hand,  distinguishing  between  that 
belonging  to  the  bank,  to  individuals,  and  to  the  Govern¬ 
ment.  The  Secretary,  in  his  report,  January  24,  1811, 
again  pointed  out  that  he  could  require  from  the  bank  only 
general  statements,  which  did  not  include  either  the  names 
of  directors  or  the  residences  of  the  stockholders. 


His  report  included  the  following  statement  of  the  bank’s 
resources  and  liabilities,  the  only  complete,  detailed  report 
extant. a  Many  of  the  figures,  it  will  be  observed,  are  for 
dates  only  a  few  weeks  apart  from  those  for  which  returns 
were  given  in  the  previous  statement: 


•  RESOURCES. 


Loans  and  discounts _ 

Loan  to  the  United  States _  $2,  750,  000.  00 

Funded  debt _  14,  338.  00 

Overdrafts  by  Charleston  commissioner.  31,  242.  48 
Treasury  drafts  not  yet  collected _  11,  466.  01 


Due  by  other  banks., _  894,  144.  77 

Notes  of  other  banks  on  hand _  393,  341.  15 


Specie _ 

Real  estate 


$14,578,294.  36 


2,  807,  046.  49 

i,  287,  485.  92 
5,  009,  567.  10 
500,  652.  77 


liabilities. 

Capital _ 

•  Circulating  notes _ $5,037,125.22 

Deposits: 

Government _ $1,929,999.60 

Banks _  634,  348.  01 

Individual _  5,  900,  422.  83 

-  8,464,770.44 

Outstanding  drafts  on  bank  and  branches  171,473.  17 

Undivided  surplus _ _ _ 


24,  183,  046.  54 
10,  000,  000.  00 


13,  673,  368.  83 
509,  677.  71 


24,  183,046.  54 


a  Finance,  Vol.  II,  p.  470. 


The  following  table  shows  in  detail  how  these  resources  and  liabilities  were  divided  among  the  bank  and  the  several  branches: 


Date. 

Discounts. 

Due  by  banks. 

Notes  of 
other  banks. 

Specie. 

Sundries. 

Deposits. 

Bank  notes. 

Treasury. 

Banks. 

Individuals. 

Issued. 

On  hand. 

In  circulation. 

Bank  of  the  United  States  _ 

Jan. 

15 , 181 1 

$4, 981,373-  00 

$79, 177. 00 

$U7,  570.  00 

$1, 407, 373. 00 

a  $2, 764, 338.  00 

$392, 909. 24 

$140, 765-00 

$2, 560, 864.  25 

$1 , 687, 893 . 00 

$126, 060. 00 

$1, 561, 833. 00 

1 

Boston _ _ 

Jan. 

5, 1811 

1, 138, 923. 59 

61 , 000. 00 

45,610. 00 

474, 497- 38 

b  466. 01 

341, 054. 47 

241 , OOO. OO 

825 , 000.  1 1 

435, 680. 00 

259, 248. 39 

176,  431- 61 

New  York _ _ 

Jan. 

12,  1 8 1 1 

^ . 9i9. 628. 98 

76 , 420.  00 

*571*5 2°-  42 

625, 417. 09 

29, 860. 00 

878,  451.  11 

1, 254, 530. 00 

176, 540. 00 

1 , 077, 990. 00 

Baltimore..  _  ... 

do 

1 , 108, 542 . 36 

V*0. A<A.  ^4 

86, 292. 71 

604, 398. 46 

199, 201 . 28 

215,991. 23 

84,  057. 38 

371, 865. 00 

210, 822. 56 

161, 042. 44 

Washington _  _ _ _ 

do 

412, 161 . 60 

146, 376.  86 

16, 465 . 84 

297, 615 . 83 

101, 895. 55 

6,  73 1 . 78 

539, 993- 04 

297 , 860. 00 

36, 414. 83 

261, 445. 17 

Norfolk  _ _ _ 

Jan. 

5, 1811 

713, 724. 40 

3,300. 34 

28, 362. 60 

307,596. 40 

b  11, 000. 00 

16, 483. 76 

112, 303. 28 

283 , 900. 00 

77, 232. 00 

206, 668. 00 

Charleston ..  _.  _ 

Dec. 

29, 1810 

93S  > 7i3- 92 

186, 000.  00 

24, 000. 00 

459, 181. 62 

c  31, 242. 48 

36, 645. 03 

491, 678. 93 

802, 735. 00 

12, 500. 00 

790, 235. 00 

Savannah 

do 

768, 681.97 

2  1,  225 .  OO 

602, 879. 41 

49, 691 . 63 

196, 854. 86 

825 . 950. 00 

216, 610. 00 

609,  340.  00 

New  Orleans  _  _ _ _ 

Dec. 

8, 1810 

599, 544. 44 

11, 416. 03 

33, 815. 00 

284, 504. 58 

166, 701. 55 

211, 219. 87 

192, 140. 00 

192, 140. 00 

Total  _ 

14, 578, 294. 26 

894, 144. 97 

393,341. 15 

5,009, 567. 10 

2,  807,  046.  49 

1. 929, 999- 60 

634,  348. 01 

5,900,  422.  83 

6,  152, 553- 00 

1, 115, 427- 78 

5,037, 125.  22 

a  Loan  to  LTnited  States _ $2,  750,  000  b  Treasury  drafts  not  yet  collected. 

Funded  debt _ _  14,  338  c  Overdraft  by  late  commissioner  of  loans.  Charleston. 


Total _  2,764,338 


7069.  (To  face  page  116.) 


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(  . 


First  Bank  of  the  United  States 


An  analysis  of  these  statements  will  serve  to  throw 
some  interesting  side  lights  upon  the  condition  and 
operations  of  the  bank  and  its  branches.  Of  the  total 
resources,  aggregating  over  $24,000,000,  the  chief  items 
were  loans,  $14,500,000;  specie,  $5,000,000;  and  govern¬ 
ment  indebtedness,  $2,800,000.  The  latter  consisted 
chiefly  of  a  6  per  cent  loan  of  $2,750,000  obtained  in 

1810.  This  loan- had  been  at  first  negotiated,  May  30, 
for  $3,750,000,  but  the  treasury  expenses  having  proved 
less  than  was  anticipated,  the  loan  was,  by  mutual  consent, 
reduced  in  October  to  $2,750,000.  It  was  reimbursable 
on  the  last  day  of  December,  181 1 ,  with  a  reservation  that 
the  bank  might,  in  case  of  nonrenewal  of  its  charter, 
demand  earlier  payment  on  giving  three  months’  notice.0 
The  Government  repaid  this  loan  in  March  and  September, 

181 1. 

The  following  table,  based  upon  the  foregoing  statement, 
shows  the  amount  of  loans  of  the  bank  and  its  branches 
with  relation  to  capital,  deposits,  and  notes  in  circulation: 


Capital. 

Discounts. 

Deposits. 

Notes. 

Philadelphia _ 

$4, 700, 000 

$4,981,373 

$3.094. 538 

$1. 561. 833 

Boston _ 

700, 000 

1.  138,  923 

1.507.054 

176,431 

New  York _ 

1 , 800, 000 

3,919, 628 

1. 633. 728 

1.077. 990 

Baltimore _ 

600, 000 

1, 108, 542 

499. 249 

i6i, 042 

Washington _ _ 

200, OOO 

412, 161 

648, 620 

261. 445 

Norfolk _  _ 

600, OOO 

713.724 

128, 787 

206, 668 

Charleston _ 

600, OOO 

935. 713 

528,323 

790, 235 

Savannah _ 

500, OOO 

768, 681 

246, 546 

609, 340 

New  Orleans _ 

300, OOO 

599. 544 

377.921 

192, 140 

Total _ 

10, OOO, OOO 

14. 578, 294 

8, 464, 770 

5.037. 125 

0 Gallatin’s  annual  report,  December  io,  1810,  Finance,  Vol.  II,  p.  441. 


117 


Na  tional  M  on  et  ary  Commission 

\ 

Of  the  total  discounts,  over  three-fifths  stood  on  the 
books  of  the  Philadelphia  bank.*  Boston  and  Baltimore 
each  carried  over  $1,000,000  of  loans,  and  Charleston 
nearly  as  much,  followed  in  order  by  Savannah,  Norfolk, 
New  Orleans,  and  Washington.  In  every  case  excepting 
Boston  and  Washington  discounts  exceeded  deposits,  and 
in  New  York,  Baltimore,  and  Savannah  discounts  were 
slightly  in  excess  of  the  combined  capital  and  deposits. 
In  this  respect,  the  mother  bank  made  the  most  conserva¬ 
tive  showing  with  discounts  of  nearly  $5,000,000  against 
capital  and  deposits  of  about  $7,800,000.  This  was  due 
to  the  fact  that  the  parent  held  itself  responsible  for  all 
of  the  eight  scattered  branches,  and  limited  its  discounts 
carefully  in  order  to  be  in  a  position  to  aid  any  of  the 
branches  if  occasion  should  arise. 

At  the  time  of  this  report,  the  various  state  banks  owed 
the  Bank  of  the  United  States  $894,000,  while  their 
deposits  in  the  latter  amounted  to  $634,000,  leaving  only 
a  small  balance  in  their  favor.  The  Baltimore  branch 
was  the  largest  creditor  of  the  state  banks,  which  owed 
it  about  a  third  of  a  million.  The  bank  also  held  $393,000 
of  the  notes  of  state  banks.  Of  the  $5,000,000  specie  on 
hand,  the  parent  bank  held  nearly  one-third,  the  Baltimore, 
Savannah,  and  New  York  branches  having  about  one-half 
as  much.  Years  later,  it  was  said  that  at  one  time  the 
New  York  branch  had  less  than  $10,000  in  specie  in  its 
vaults.0 

The  aggregate  deposits  of  $8,500,000  consisted  of 
government  deposits,  $1,900,000;  individual  deposits, 
$5,900,000;  bank  balances,  $600,000.  New  York  held 

a  Gouge,  Journal  of  Banking,  p.  252. 

118 


First  Bank  of  the  United  States 


$625,000  of  treasury  funds,  about  one-third  of  the  total, 
followed  by  Philadelphia  with  $393,000,  and  Boston  with 
$341,000.  Of  bank  balances,  Boston  and  Baltimore  each 
had  something  over  $200,000;  Norfolk,  Charleston, 
Savannah,  and  New  Orleans  had  none.  The  parent  bank 
had  individual  deposits  amounting  to  over  $2,500,000, 
nearly  one-half  of  the  total;  New  York  stood  second,  and 
Boston  third,  with  over  $800,000  each;  Baltimore  had 
only  $84,000,  while  the  small  Washington  office  had  over 
half  a  million.  At  this  date  the  undivided  profits  of  the 
Bank  of  the  United  States  amounted  to  $509,677. 

Profits  and  Dividends. 

On  April  4,  1810,  Gallatin  submitted  to  the  Senate  a 
list  of  dividends  declared  by  the  bank  down  to  January  1 
of  that  year.  In  addition  to  the  semiannual  dividend  of 
4  per  cent,  some  extra  dividends  were  declared,  making 
an  average  of  8^-§  per  cent.  At  the  date  of  this  report, 
the  bank  had  a  surplus  of  $409,410,  made  up  of  “general 
bank  estate,”  $125,000,  intended  as  an  offset  against  loss 
on  the  bank’s  real  estate,  which  had  been  paid  for  out  of 
the  capital  and  not  out  of  profits;  and  “  contingent  fund,” 
$284,410,  to  cover  possible  losses.  As  to  the  actual  profits 
of  the  bank  and  its  branches,  Gallatin  said:  “ The  nominal 
profits  resulting  to  the  bank  from  each  of  its  offices  of 
discount  and  deposit  could  not  be  ascertained  without  an 
investigation  of  all  the  weekly  returns  made  to  this  depart¬ 
ment  ;  and  there  are  no  returns  from  which  the  actual  loss 
sustained  by  each  office  can  be  known.”  Estimating 
annual  expenses  at  $125,000,  “the  losses  must  in  the 
whole  have  amounted  to  about  $35,000  a  year.” 


119 


Na  t  ion  a  l  M  o  n  et  a  r  y  Commission 


\ 

The  following  table  shows  the  capital  and  the  loans  of 
the  parent  bank  and  the  several  branches,  according  to 
the  most  recent  returns  at  the  time  of  this  report,  April 
4,  1810: a 


Boston _ 

New  York _ 

Baltimore _ 

Washington _ 

Norfolk _ 

Charleston _ 

Savannah _ , - 

New  Orleans _ 

Philadelphia: 

Balance  due  in  account  current  by  branches 

Capital  reserved _ 

Funded  debt _ 

Total . . ' - 


Capital. 

Notes  dis¬ 
counted. 

$700, 000 

$998, 859 

1 , 800, 000 

4, 175,874 

6oo, 000 

1. 349. 550 

200, OOO 

485. 285 

600, 000 

880, 1 70 

600  000 

x, 409, 916 

500, 000 

1, 054, 113 

300, 000 

611,517 

750, 000 

3, 950, 000 

4,  572, 586 

1,411,627 

IO, OOO, OOO 

16, 949, 497 

With  these  figures  as  a  basis,  Gallatin  estimated  the 
annual  expenses  and  losses  of  the  bank  as  follows:  Six 
per  cent  on  the  $17,000,000,  the  amount  usually  loaned 
on  interest,  amounted  to  $1,020,000.  The  dividends  on 
the  $10,000,000  at  8^-J  per  cent  would  be  $836,111, 
and  the  undivided  profits  ($409,410  on  January  1,  1810, 
divided  by  eighteen,  the  years  of  the  bank’s  existence), 
$22,745;  subtracting  these  two  sums  there  remained 
$161,448,  the  annual  amount  of  expenses  and  losses.  Of 
this  amount,  Gallatin  had  estimated  $125,000  for  annual 
expenses,  which  left  $36,448  a  year  for  actual  losses.  This 
loss  of  less  than  one-half  of  1  per  cent  per  annum  on  bad 
debts  speaks  strongly  for  the  conservative  management 
of  the  bank’s  affairs.  Long  after  the  bank  had  disap- 


0  Finance  Vol.  II  p.  418. 


120 


First  Bank  of  the  United  States 


peared  one  authority  estimated  its  average  annual  losses, 
during  the  twenty  years  of  its  existence,  at  sixty-one 
one-hundredths  of  i  per  cent.® 

In  the  debates  of  1811,  the  accuracy  of  Gallatin’s  state¬ 
ment  of  the  profits  of  the  bank  was  challenged.  It  was 
contended  that  the  bank  had  concealed  its  real  profits 
under  charges  to  the  loss  and  contingency  accounts,  and 
that  its  actual  net  profit  was  over  1 1  per  cent.  It  was 
argued  that  the  branches  had  made  a  gross  profit  of  more 
than  13  per  cent.  These  had  a  total  capital  of  $5,300,000 
and  discounts  of  $11,964,000,  but  the  mother  bank, 
which  retained  a  capital  of  $4,700,000,  granted  discounts 
of  only  $4,572,000.  It  was  well  known,  however,  that 
bank  capital  had  been  as  profitably  used  in  Philadelphia 
as  in  any  other  city,  and  the  state  banks  unaided  by 
government  deposits  had  yielded  dividends  so  large 
as-  to  send  their  stock  to  35  to  50  per  cent  premium.  It 
was  thought,  therefore,  that  “after  the  deduction  for 
losses  (that  probably  never  happened)  and  contingencies 
never  expected  to  take  place,”  the  net  profit  was  more 
than  11  per  cent  instead  of  83^  per  cent,  as  had  been 
reported  by  the  Secretary.  (Love.)  On  the  other  hand, 
it  was  contended  that  the  parent  bank  had  to  have  at  all 
times  sufficient  reserve  to  meet  every  emergency,  and  so 
could  not  extend  its  discounts  too  far.  A  branch  that 
produced  no  profit  but  sometimes  actual  loss  might  be 
just  as  expensive  to  maintain  as  one  that  was  productive. 
The  experience  of  only  the  most  profitable  branches  had 
been  cited  by  the  critic ;  others  might  show  a  considerable 
loss.  (Finley.)  The  complete  record  of  dividends  shows 

'  a  H.  C.  Carey:  The  Credit  System. 


121 


N  at  i  o  n  a  l  M  o  n  et  ar  y  Commission 


\ 

that  Gallatin’s  estimate,  based  upon  the  report  of  the 
bank,  was  substantially  correct.® 

The  first  few  dividends  declared  by  the  Bank  of  the 
United  States  were  quite  low  in  contrast  with  those  of 
the  Bank  of  North  America.  Up  to  1800,  dividends  at 
the  rate  of  8  per  cent  were  paid,  with  an  extra  dividend 
of  1  per  cent  in  January,  1798.  In  1801,  10  per  cent  was 
distributed,  9  per  cent  in  1802,  and  8  per  cent  in  1803 
and  1804.  Thereafter  8  per  cent  was  the  regular  divi¬ 
dend,  excepting  for  the  year  1807,  when  10  per  cent  was 
declared. 

The  largest  annual  dividend  of  the  Bank  of  the  United 
States  was  10  per  cent  in  1801  and  in  1807;  the  lowest  7^ 
per  cent  in  1793.  In  1792,  the  Bank  of  North  America 
declared  a  dividend  of  15  per  cent;  in  1793,  13  per  cent; 
and  from  1794  to  1799,  inclusive,  12  per  cent;  1800,  1801, 
1802,  10  per  cent;  1803,  9^  per  cent;  1804  to  1810,  9  per 
cent.  The  Bank  of  Pennsylvania,  established  in  1794, 
started  with  8  per  cent,  then  rose  to  10  for  one  year, 
dropped  to  9%  for  three  years,  then  to  8  for  six  years,  up 
to  9  for  seven  years,  returning  to  8  as  the  regular  divi¬ 
dend.  The  uniform  dividend  of  the  Philadelphia  Bank, 
established  in  1804,  was  8  per  cent;  also  that  of  the 
Farmers  and  Mechanics’,  which  opened  in  1808. b 

Taxation. 

In  1797,  a  federal  tax  of  6  mills  on  the  dollar  was  laid 
on  the  notes  of  all  banks  below  $50,  with  lower  rates  on 
the  higher  denominations.  Provision  was  made  that  the 
tax  might  be  commuted  at  1  per  cent  on  the  dividends. 

a  See  Appendix  C.  &  Carey’s  Letters  to  Seybert,  Appendix  D 


122 


First  Bank  of  the  United  States 


The  Bank  of  North  America  and  probably  other  banks 
paid  the  tax  by  the  latter  method.® 

In  1805,  the  legislature  of  Georgia  passed  a  law  taxing 
the  branch  of  the  Bank  of  the  United  States  at  Savannah. 
The  bank  refused  to  pay  the  tax,  whereupon  the  state 
officers  seized  two  boxes  of  specie  worth  $2,004.  The 
bank  brought  an  action  for  trespass  in  the  circuit  court, 
which  rendered  a  decision  in  favor  of  the  defendant  on 
a  demurrer.  The  case  was  appealed  to  the  Supreme 
Court  of  the  United  States,  where  it  became  involved  in 
technicalities.  Georgia  then  desisted  until  it  should  be 
decided  whether  the  bank  was  to  be  rechartered. b  The 
question  of  taxing  the  bank  was  mooted  in  the  Pennsyl¬ 
vania  legislature,  but  no  action  was  taken. 

Conservatism,  a  Characteristic. 

Conservatism,  verging  at  times  upon  extreme  and 
unnecessary  caution,  characterized  the  management  of 
the  bank’s  affairs,  restricting  both  its  full  usefulness  to 
the  business  community  and  its  returns  to  the  stock¬ 
holders.  Soon  after  the  establishment  of  the  second 
Bank  of  the  United  States,  in  1817,  which  was  much  more 
liberal  in  its  general  policies,  President  Jones,  writing  to 
William  H.  Crawford,  Secretary  of  the  Treasury,  said:  “I 
am  not  at  all  disposed  to  take  the  late  Bank  of  the  United 
States  as  an  exemplar  in  practice;  because  I  think  its 
operations  were  circumscribed  by  a  policy  less  enlarged, 
liberal,  and  useful  than  its  powers  and  resources  would 
have  justified.  *  *  *  It  had  but  few  powerful  com¬ 

petitors,  and  these  were  rendered  harmless  by  the  caii- 

a  Minutes,  Bank  of  North  America,  September  28,  1797. 

6  Sumner,  History  of  Banking  in  all  Nations,  p.  48. 


123 


N  a  t  ion  a  l  M  o  n  et  a  r  y  Commission 


tious  policy  of  its  directors  and  the  narrow  sphere  of  its 
operation.”® 

The  bank  adopted  a  system  of  permanent  loans  to  both 
individuals  and  banks. b  These  permanent  accommo¬ 
dations  were  well-nigh  universal  in  the  practice  of  the 
early  banks,  and  were  even  more  stifling  to  progress 
and  impartial  service  then  than  in  our  own  day  because 
of  the  limited  sources  of  loanable  funds.  The  enor¬ 
mous  permanent  loans  to  the  Government  during  the  first 
few  years  of  the  bank’s  life  prevented  it  from  serving 
the  business  interests  of  the  country  as  fully  as  it  might 
otherwise  have  done,  and  were  an  incubus  which  it 
finally  shook  off  only  by  making  the  most  unqualified 
demand  for  payment.  It  would  have  been  better, 
probably,  had  the  bank  taken  the  same  firm  stand  with 
other  accommodation  borrowers.  The  charges  of  par¬ 
tiality  in  making  loans,  which  were  made  against  the 
bank  in  the  debates  of  1811,  do  not  seem  to  have  been 
well  sustained.  The  Philadelphia  delegations  of  me¬ 
chanics  and  manufacturers  who  went  to  Washington 
to  urge  a  renewal  of  the  charter  testified  that  the  bank 
was  impartial  in  its  accommodations.0 

There  is  some  ground  for  the  belief  that,  in  the  case  of 
the  parent  bank,  at.  least,  large  importers  and  traders  of 
the  type  of  Stephen  Girard  were  accommodated  before 
the  needs  of  the  retailer  and  shopkeeper  were  served. 
Because  of  the  additional  resources  arising  from  the  gov¬ 
ernment  deposits  the  bank  had  “  the  choice  of  customers.” 
The  New  York  branch  was  accused  of  refusing  accommo¬ 
dations  to  importers  who  were  perfectly  acceptable  to 

°  Finance,  Vol.  IV,  p.  807.  b  Ibid.,  p.  774.  cSee  p  83. 


124 


First  Bank  of  the  United  States 


the  Manhattan  Bank  there,  and  the  Norfolk  and  Bal¬ 
timore  branches  were  charged  with  similar  partisan 
partiality.®  These  refusals,  however,  may  have  been 
based  upon  perfectly  good  and  sufficient  business  cir¬ 
cumstances.  In  the  main,  the  bank  as  far  as  its  resources 
and  the  exigencies  of  the  times  would  permit,  met  all 
the  reasonable  demands  of  borrowers  at  a  fair  rate  of 
interest.  It  was  largely  instrumental,  therefore,  in 
repressing  the  practice  of  usury,  which  had  long  preyed 
upon  legitimate  business. 

It  was  estimated  in  1811  that  the  total  specie  sup¬ 
ply  of  the  country  amounted  to  only  $10,000,000.  Of 
this  sum  the  Bank  of  the  United  States  held  more  than 
$5,000,000,  which  gave  it  a  powerful  influence  over  all 
other  banking  institutions.  In  some  sections  the  state 
banks  had  much  larger  resources  and  conducted  a  much 
more  extensive  business  than  the  branch  in  that  section, 
yet  behind  the  branch  there  always  loomed  the  shadow 
of  the. big  bank,  whose  enmity  no  other  institution  will¬ 
ingly  incurred.  But,  though  the  powerful  Bank  of  the 
United  States  tended  to  restrain  the  smaller  banks, 
compelling  them  to  keep  within  the  limits  of  conserva¬ 
tive  business,  yet  it  was  always  friendly  and  ready  to 
aid  them  when  unexpectedly  pressed,  and  “generally 
they  had  the  use  of  not  less  than  one-tenth  of  its  capital.”6 
By  virtue  of  its  large  resources  and  its  numerous  branches 
it  was  able  to  equalize  the  benefits  of  large  loanable 
capital  throughout  the  country  and  to  relieve  any  sud¬ 
den  pressure  in  trade  much  more  effectively  than  the 
state  banks  were  able  to  do.c 

a  See  p.  92.  b  Second  petition  for  renewal,  p.  76. 

c  Memorial  of  the  Bank  of  New  York,  p.  79. 


125 


Appendix  A. 


Act  of  Incorporation. 

(February  25,  1791.) 

AN  ACT  to  incorporate  the  subscribers  to  the  Bank  of  the  United  States. 

Whereas,  it  is  conceived  that  the  establishment  of  a  bank  for  the  United 
States,  upon  a  foundation  sufficiently  extensive  to  answer  the  purposes 
intended  thereby,  and  at  the  same  time- upon  the  principles  which  afford 
adequate  security  for  an  upright  and  prudent  administration  thereof,  will 
be  very  conducive  to  the  successful  conducting  of  the  national  finances; 
will  tend  to  give  facility  to  the  obtaining  of  loans  for  the  use  of  the  Govern¬ 
ment  in  sudden  emergencies;  and  will  be  productive  of  considerable  advan¬ 
tages  to  trade  and  industry  in  general:  Therefore — 

Section  i.  Be  it  enacted,  etc.,  That  a  Bank  of  the  United  States  shall  be 
established,  the  capital  stock  whereof  shall  not  exceed  ten  million  dollars, 
divided  into  twenty-five  thousand  shares,  each  share  being  four  hundred 
dollars;  and  that  subscriptions  toward  constituting  the  said  stock  shall,  on 
the  first  Monday  of  April  next,  be  opened  at  the  city  of  Philadelphia, 
under  the  superintendence  of  such  persons,  not  less  than  three,  as  shall  be 
appointed  for  that  purpose  by  the  President  of  the  United  States  (who  is 
hereby  empowered  to  appoint  the  said  persons  accordingly),  which  sub¬ 
scriptions  shall  continue  open  until  the  whole  of  the  said  stock  shall  have 
been  subscribed. 

SEC.  2.  And  be  it  further  enacted,  That  it  shall  be  lawful  for  any  person, 
copartnership,  or  body  politic  to  subscribe  for  such  or  so  many  shares  as  he, 
she,  or  they  shall  think  fit,  not  exceeding  one  thousand,  except  as  shall  be' 
hereafter  directed  relatively  to  the  United  States;  and  that  the  sums 
respectively  subscribed,  except  on  behalf  of  the  United  States,  shall  be 
payable  one-fourth  in  gold  and  silver  and  three-fourths  in  that  part  of  the 
public  debt  which,  according  to  the  loan  proposed  in  the  fourth  and  fif¬ 
teenth  sections  of  the  act  entitled  “An  act  making  provision  for  the  debt 
of  the  United  States.”  shall  bear  an  accruing  interest  at  the  time  of  payment 
of  six  per  centum  per  annum,  and  shall  also  be  payable  in  four  equal  parts, 
in  the  aforesaid  ratio  of  specie  to  debt,  at  the  distance  of  six  calendar 
months  from  each  other,  the  first  whereof  shall  be  paid  at  the  time  of 
subscription.* 

Sec.  3.  And  be  it  further  enacted,  That  all  those  who  shall  become  sub¬ 
scribers  to  the  said  bank,  their  successors  and  assigns,  shall  be,  and  are 
hereby,  created  and  made  a  corporation  and  body  politic  by  the  name 
and  style  of  the  president,  directors,  and  company  of  the  Bank  of  the 


126 


Ft  rst  Bank  of  the  United  States 


United  States,  and  shall  so  continue  until  the  fourth  day  of  March,  one 
thousand  eight  hundred  and  eleven;  and  by  that  name  shall  be,  and  are 
hereby,  made  able  and  capable  in  law  to  have,  purchase,  receive,  possess, 
enjoy,  and  to  retain  to  them  and  their  successors  lands,  rents,  tenements, 
hereditaments,  goods,  chattels,  and  effects  of  what  kind,  nature,  or  quality 
soever,  to  an  amount  not  exceeding  in  the  whole  fifteen  millions  of  dollars, 
including  the  amount  of  the  capital  stock  aforesaid;  and  the  same  to  sell, 
grant,  demise,  alien,  or  dispose  of;  to  sue  and  be  sued,  plead  and  be 
impleaded,  answer  and  be  answered,  defend  and  be  defended,  in  courts  of 
record,  or  any  other  place  whatsoever,  and  also  to  make,  have,  and  use  a 
common  seal,  and  the  same  to  break,  alter,  and  renew  at  their  pleasure; 
and  also  to  ordain,  establish,  and  put  in  execution  such  by-laws,  ordinances, 
and  regulations  as  shall  seem  necessary  and  convenient  for  the  government 
of  the  said  corporation,  not  being  contrary  to  law  or  to  the  constitution 
thereof  (for  which  purpose  general  meetings  of  the  stockholders  shall  and 
may  be  called  by  the  directors,  and  in  the  manner  hereinafter  specified), 
and  generally  to  do  and  execute  all  and  singular  acts,  matters,  and  things 
which  to  them  it  shall  or  may  appertain  to  do;  subject  nevertheless  to  the 
rules,  regulations,  restrictions,  limitations,  and  provisions  hereinafter 
prescribed  and  declared. 

SEC.  4.  And  be  it  further  enacted,  That  for  the  well  ordering  of  the  affairs 
of  the  said  corporation  there  shall  be  twenty-five  directors,  of  whom  there 
shall  be  an  election  on  the  first  Monday  of  January  in  each  year  by  the 
stockholders  or  proprietors  of  the  capital  stock  of  the  said  corporation  and 
by  plurality  of  the  votes  actually  given;  and  those  who  shall  be  duly  chosen 
at  any  election  shall  be  capable  of  serving  as  directors  by  virtue  of  such 
choice  until  the  end  or  expiration  of  the  Monday  of  January  next  ensu¬ 
ing  the  time  of  such  election  and  no  longer.  And  the  said  directors  at 
their  first  meeting  after  each  election  shall  choose  one  of  their  number  as 
president. 

Sec.  5.  Provided  always ,  and  be  it  further  enacted,  That,  as  soon  as  the 
sum  of  four*  hundred  thousand  dollars  in  gold  and  silver  shall  have  been 
actually  received  on  account  of  the  subscriptions  to  the  said  stock,  notice 
thereof  shall  be  given,  by  the  persons  under  whose  superintendence  the 
same  shall  have  been  made,  in  at  least  two  public  gazettes  printed  in  the 
city  of  Philadelphia;  and  the  said  persons  shall,  at  the  same  time  in  like 
manner,  notify  a  time  and  place  within  the  said  city,  at  the  distance  of 
ninety  days  from  the  time  of  such  notification,  for  proceeding  to  the  elec¬ 
tion  of  directors;  and  it  shall  be  lawful  for  such  election  to  be  then  and 
there  made;  and  the  persons  who  shall  then  and  there  be  chosen  shall  be 
the  first  directors  and  shall  be  capable  of  serving,  by  virtue  of  such  choice, 
until  the  end  or  expiration  of  the  Monday  in  January  next  ensuing  the  time 
of  making  the  same,  and  shall  forthwith  thereafter  commence  the  opera¬ 
tions  of  the  said  bank,  at  the  said  city  of  Philadelphia:  And  provided 
further,  That,  in  case  it  should  at  any  time  happen  that  an  election  of  direc¬ 
tors  should  not  be  made  upon  any  day  when  pursuant  to  this  act  it  ought 


127 


N  a  t  i  o  n  a  l  M  o  n  et  a  r  y  Commission 


to  have  been  made,  the  said  corporation  shall  not,  for  that  cause  be  deemed 
to  be  dissolved;  but  it  shall  be  lawful  on  any  other  day  to  hold  and  make 
an  election  of  directors  in  such  manner  as  shall  have  been  regulated  by  the 
laws  and  ordinances  of  the  said  corporation:  And  provided,  lastly ,  That,  in 
case  of  the  death,  resignation,  absence  from  the  United  States,  or  removal 
of  a  director  by  the  stockholders  his  place  may  be  filled  up  by  a  new  choice 
for  the  remainder  of  the  year. 

SEC.  6.  And  be  it  further  enacted ,  That  the  directors  for  the  time  being 
shall  have  power  to  appoint  such  officers,  clerks,  and  servants  under  them, 
as  shall  be  necessary  for  executing  the  business  of  the  said  corporation,  and 
to  allow  them  such  compensation  for  their  services  respectively  as  shall  be 
reasonable;  and  shall  be  capable  of  exercising  such  other  powers  and 
authorities  for  the  well  governing  and  ordering  of  the  affairs  of  the  said 
corporation  as  shall  be  described,  fixed,  and  determined  by  the  laws,  regu¬ 
lations,  and  ordinances  of  the  same. 

Sec.  7.  And  be  it  further  enacted,  That  the  following  rules,  restrictions, 
limitations,  and  provisions,  shall  form  and  be  fundamental  articles  of  the 
constitution  of  the  said  corporation,  viz: 

I.  The  number  of  votes  to  which  each  stockholder  shall  be  entitled  shall 
be  according  to  the  number  of  shares  he  shall  hold,  in  the  proportions 
following:  That  is  to  say,  for  one  share,  and  not  more  than  two  shares, 
one  vote;  for  every  two  shares  above  two,  and  not  exceeding  ten,  one  vote; 
for  every  four  shares  above  ten,  and  not  exceeding  thirty,  one  vote;  for 
every  six  shares  above  thirty,  and  not  exceeding  sixty,  one  vote;  for  every 
eight  shares  above  sixty,  and  not  exceeding  one  hundred,  one  vote;  and 
for  every  ten  shares  above  one  hundred,  one  vote.  But  no  person,  copart¬ 
nership,  or  body  politic  shall  be  entitled  to  a  greater  number  than  thirty 
votes.  And,  after  the  first  election,  no  share  or  shares  shall  confer  a  right 
of  suffrage,  which  shall  not  have  been  holden  three  calendar  months  previous 
to  the  day  of  election. 

Stockholders  actually  resident  within  the  United  States,  and  none  others, 
may  vote  in  election  by  proxy. 

II.  Not  more  than  three-fourths  of  the  directors  in  office,  exclusive  of 
the  president,  shall  be  eligible  for  the  next  succeeding  year;  but  the  director 
who  shall  be  president  at  the  time  of  an  election  may  always  be  reelected. 

III.  None  but  a  stockholder,  being  a  citizen  of  the  United  States,  shall 
be  eligible  as  a  director. 

IV.  No  director  shall  be  entitled  to  any  emolument  unless  the  same 
shall  have  been  allowed  by  the  stockholders  at  a  general  meeting.  The 
stockholders  shall  make  such  compensation  to  the  president  for  his  extraor¬ 
dinary  attendance  at  the  bank  as  shall  appear  to  them  reasonable. 

V.  Not  less  than  seven  directors  shall  constitute  a  board  for  the  transac¬ 
tion  of  business,  of  whom  the  president  shall  always  be  one,  except  in  case 
of  sickness,  or  necessary  absence,  in  wffiich  case  his  place  may  be  supplied 
by  any  other  director,  whom  he,  by  writing  under  his  hand,  shall  nominate 
for  the  purpose. 


128 


First  Bank  of  the  United  States 


VI.  Any  number  of  stockholders,  not  less  than  sixty,  who  together  shall 
be  proprietors  of  two  hundred  shares  or  upwards,  shall  have  power  at  any 
time  to  call  a  general  meeting  of  the  stockholders,  for  purposes  relative  to 
the  institution,  giving  at  least  ten  weeks’  notice,  in  two  public  gazettes  of 
the  place  where  the  bank  is  kept,  and  specifying,  in  such  notice,  the  object 
or  objects  of  such  meeting. 

VII.  Every  cashier  or  treasurer,  before  he  enters  upon  the  duties  of 
his  office,  shall  be  required  to  give  bond,  with  two  or  more  sureties,  to  the 
satisfaction  of  the  directors,  in  a  sum  not  less  than  fifty  thousand  dollars, 
with  condition  for  his  good  behavior. 

VIII.  The  lands,  tenements,  and  hereditaments  which  it  shall  be  lawful 
for  the  said  corporation  to  hold  shall  be  only  such  as  shall  be  requisite  for 
its  immediate  accommodation  in  relation  to  the  convenient  transacting 
of  its  business,  and  such  as  shall  have  been  bona  fide  mortgaged  to  it  by 
way  of  security,  or  conveyed  to  it  in  satisfaction  of  debts  previously  con¬ 
tracted  in  the  course  of  its  dealings,  or  purchased  at  sales  upon  judgments 
which  shall  have  been  obtained  for  such  debts. 

IX.  The  total  amount  of  the  debts  which  the  said  corporation  shall  at 
any  time  owe,  whether  by  bond,  bill,  note,  or  other  contract,  shall  not 
exceed  the  sum  of  ten  million  dollars  over  and  above  the  moneys  then 
actually  deposited  in  the  bank  for  safe  keeping,  unless  the  contracting  of 
any  greater  debt  shall  have  been  previously  authorized  by  a  law  of  the 
United  States.  In  case  of  excess,  the  directors  under  whose  administration 
it  shall  happen  shall  be  liable  for  the  same,  in  their  natural  and  private 
capacities;  and  an  action  of  debt  may,  in  such  case,  be  brought  against 
them,  their  or  any  of  their  heirs,  executors,  or  administrators,  in  any  court 
of  record  of  the  United  States,  or  of  either  of  them,  by  any  creditor  or 
creditors  of  the  said  corporation,  and  may  be  prosecuted  to  judgment  and 
execution,  any  condition,  covenant,  or  agreement  to  the  contrary  notwith¬ 
standing.  But  this  shall  not  be  construed  to  exempt  the  said  corporation, 
or  the  lands,  tenements,  goods,  or  chattels  of  the  same,  from  being  also 
liable  for  and  chargeable  with  the  said  excess.  Such  of  the  said  directors 
who  may  have  been  absent  when  the  said  excess  was  contracted  or  created, 
or  who  may  have  dissented  from  the  resolution  or  act  whereby  the  same 
wras  so  contracted  or  created,  may  respectively  exonerate  themselves  from 
being  so  liable  by  forthwith  giving  notice  of  the  fact,  and  of  their  absence 
or  dissent,  to  the  President  of  the  United  States,  and  to  the  stockholders, 
at  a  general  meeting,  which  they  shall  have  power  to  call  for  that  purpose. 

X.  The  said  corporation  may  sell  any  part  of  the  public  debt  whereof  its 
stock  shall  be  composed,  but  shall  not  be  at  liberty  to  purchase  any  public 
debt  whatsoever;  nor  shall  directly  or  indirectly  deal  or  trade  in  anything, 
except  bills  of  exchange,  gold  or  silver  bullion,  or  in  the  sale  of  goods  really 
and  truly  pledged  for  money  lent  and  not  redeemed  in  due  time,  or  of 
goods  which  shall  be  the  produce  of  its  lands.  Neither  shall  the  said 
corporation  take  more  than  at  the  rate  of  six  per  centum  per  annum  for  or 
upon  its  loans  or  discounts. 


7069 — 10 - 9 


129 


N  a  tional  M  o  n  e  t  ar  y  Commission 


XI.  No  loan  shall  be  made  by  the  said  corporation  for  the  use  or  on 
account  of  the  Government  of  the  United  States  to  an  amount  exceeding 
one  hundred  thousand  dollars,  or  of  any  particular  State  to  an  amount, 
exceeding  fifty  thousand  dollars,  or  of  any  foreign  prince  or  state,  unless 
previously  authorized  by  a  law  of  the  United  States. 

XII.  The  stock  of  the  said  corporation  shall  be  assignable  and  transfer¬ 
able,  according  to  such  rules  as  shall  be  instituted  in  that  behalf,  by  the 
laws  and  ordinances  of  the  same. 

XIII.  The  bills  obligatory  and  of  credit,  under  the  seal  of  the  said 
corporation,  which  shall  be  made  to  any  person  or  persons,  shall  be  assign¬ 
able  by  indorsement  thereupon  under  the  hand  or  hands  of  such  person  or 
persons,  and  of  his,  her,  or  their  assignee  or  assignees,  and  so  as  absolutely 
to  transfer  and  vest  the  property  thereof  in  each  and  every  assignee  or 
assignees  successively,  and  to  enable  such  assignee  or  assignees  to  bring 
and  maintain  an  action  thereupon  in  his,  her,  or  their  own  name  or  names. 
And  bills  or  notes  which  may  be  issued  by  order  of  the  said  corporation, 
signed  by  the  president  and  countersigned  by  the  principal  cashier  or 
treasurer  thereof,  promising  the  payment  of  money  to  any  person  or 
persons,  his,  her,  or  their  order  or  to  bearer,  though  not  under  the  seal  of 
the  said  corporation,  shall  be  binding  and  obligatory  upon  the  same,  in  the 
like  manner,  and  with  the  like  force  and  effect,  as  upon  any  private  person 
or  persons,  if  issued  by  him  or  them,  in  his,  her,  or  their  private  or  natural 
capacity  or  capacities;  and  shall  be  assignable  and  negotiable,  in  like 
manner,  as  if  they  were  so  issued  by  such  private  person  or  persons — that  is 
to  say,  those  which  shall  be  payable  to  any  person  or  persons,  his,  her,  or 
their  order,  shall  be  assignable  by  indorsement,  in  like  manner,  and  with 
the  like  effect,  as  foreign  bills  of  exchange  now  are;  and  those  which  are  pay¬ 
able  to  bearer  shall  be  negotiable  and  assignable  by  delivery  only. 

XIV.  Half-yearly  dividends  shall  be  made  of  so  much  of  the  profits  of 
the  bank  as  shall  appear  to  the  directors  advisable;  and  once  in  every 
three  years  the  directors  shall  lay  before  the  stockholders,  at  a  general 
meeting,  for  their  information,  an  exact  and  particular  statement  of  the 
debts  which  shall  have  remained  unpaid  after  the  expiration  of  the  original 
credit,  for  a  period  of  treble  the  term  of  that  credit;  and  of  the  surplus 
of  profit,  if  any,  after  deducting  losses  and  dividends.  If  there  shall  be 
failure  in  the  payment  of  any  part  of  any  sum,  subscribed  by  any  person, 
copartnership,  or  body  politic,  the  party  failing  shall  lose  the  benefit  of 
any  dividend  which  may  have  accrued  prior  to  the  time  for  making  such 
payment  and  during  the  delay  of  the  same. 

XV.  It  shall  be  lawful  for  the  directors  aforesaid  to  establish  offices 
wheresoever  they  shall  think  fit,  within  the  United  States,  for  the  pur¬ 
poses  of  discount  and  deposit  only,  and  upon  the  same  terms  and  in  the 
same  manner  as  shall  be  practiced  at  the  bank,  and  to  commit  the  man¬ 
agement  of  the  said  offices  and  the  making  of  said  discounts  to  such  persons, 


130 


First  Bank  of  the  United  States 


under  such  agreements  and  subject  to  such  regulations  as  they  shall  deem 
proper,  not  being  contrary  to  law  or  to  the  constitution  of  the  bank. 

XVI.  The  officer  at  the  head  of  the  Treasury  Department  of  the  United 
States  shall  be  furnished,  from  time  to  time,  as  often  as  he  may  require, 
not  exceeding  once  a  week,  with  statements  of  the  amount  of  the  capital 
stock  of  the  said  corporation  and  of  the  debts  due  to  the  same;  of  the 
moneys  deposited  therein;  of  the  notes  in  circulation,  and  of  the  cash  in 
hand;  and  shall  have  a  right  to  inspect  such  general  accounts  in  the  books 
of  the  bank  as  shall  relate  to  the  said  statements:  Provided,  That  this 
shall  not  be  construed  to  imply  a  right  of  inspecting  the  account  of  any 
private  individual  or  individuals  with  the  bank. 

Sec.  8.  And  be  it  further  enacted,  That  if  the  said  corporation,  or  any 
person  or  persons  for  or  to  the  use  of  the  same,  shall  deal  or  trade  in 
buying  or  selling  any  goods,  wares,  merchandise,  or  commodities  what¬ 
soever,  contrary  to  the  provisions  of  this  act,  all  and  every  person  and 
persons,  by  whom  any  order  or  direction  for  so  dealing  or  trading  shall 
have  been  given,  and  all  and  every  person  and  persons  who  shall  have  been 
concerned  as  parties  or  agents  therein,  shall  forfeit  and  lose  treble  the 
value  of  the  goods,  wares,  merchandises,  and  commodities  in  which  such 
dealing  and  trade  shall  have  been;  one-half  thereof  to  the  use  of  the  in¬ 
former  and  the  other  half  thereof  to  the  use  of  the  United  States,  to  be 
recovered  with  costs  of  suit. 

SEC.  9.  And  be  it  further  enacted,  That  if  the  said  corporation  shall 
advance  or  lend  any  sum  for  the  use  or  on  account  of  the  Government  of 
the  United  States  to  an  amount  exceeding  one  hundred  thousand  dollars; 
or  of  any  particular  State  to  an  amount  exceeding  fifty  thousand  dollars; 
or  of  any  foreign  prince  or  state  (unless  previously  authorized  thereto  by 
a  law  of  the  United  States),  all  and  every  person  and  persons,  by  and  with 
whose  order,  agreement,  consent,  approbation,  or  connivance,  such  unlaw¬ 
ful  advance  or  loan  shall  have  been  made,  upon  conviction  thereof,  shall 
forfeit  and  pay,  for  every  such  offense,  treble  the  value  or  amount  of  the 
sum  or  sums  which  shall  have  been  so  unlawfully  advanced  or  lent,  one- 
fifth  thereof  to  the  use  of  the  informer  and  the  residue  thereof  to  the  use  of 
the  United  States,  to  be  disposed  of  by  law  and  not  otherwise. 

Sec.  10.  And  be  it  further  enacted,  That  the  bills  or  notes  of  the  said 
corporation,  originally  made  payable,  or  which  shall  have  become  payable 
on  demand,  in  gold  or  silver  coin,  shall  be  receivable  in  all  payments  to  the 
United  States. 

SEC.  11.  And  be  it  further  enacted,  That  it  shall  be  lawful  for  the  Presi¬ 
dent  of  the  United  States  at  any  time  or  times,  within  eighteen  months 
after  the  first  day  of  April  next,  to  cause  a  subscription  to  be  made  to  the 
stock  of  the  said  corporation,  as  part  of  the  aforesaid  capital  stock  of  ten 
million  dollars,  on  behalf  of  the  United  States,  to  an  amount  not  exceeding 
two  million  dollars,  to  be  paid  out  of  the  moneys  which  shall  be  borrowed 
by  virtue  of  either  of  the  acts,  the  one  entitled  “An  act  making  provision 


131 


N  at  i o  n  a  l  M  o  n  e  t  a  r  y  Commission 


for  the  debt  of  the  United  States;”  and  the  other  entitled  “An  act  making 
provision  for  the  reduction  of  the  public  debt;”  borrowing  of  the  bank  an 
equal  sum,  to  be  applied  to  the  purposes,  for  which  the  said  moneys  shall 
have  been  procured,  reimbursable  in  ten  years,  by  equal  annual  install¬ 
ments,  or  at  any  time  sooner,  or  in  any  greater  proportions,  that  the 
Government  may  think  fit. 

SEC.  12.  And  be  it  further  enacted,  That  no  other  bank  shall  be  estab¬ 
lished  by  any  future  law  of  the  United  States  during  the  continuance  of  the 
corporation  hereby  created,  for  which  the  faith  of  the  United  States  is 
hereby  pledged. 


132 


Appendix  B. 

Ordinance  and  By-Laws  for  the  Regulation  of 
the  Bank  of  the  United  States. 

Section  I.  The  charter  of  incorporation  granted  to  the  Bank  of  the 
United  States,  amongst  other  rights,  privileges,  and  abilities  therein  con¬ 
veyed,  having  empowered  the  stockholders  at  general  meetings,  legally 
convened,  to  make,  ordain,  establish,  and  put  in  execution,  such  by-laws, 
ordinances,  and  regulations,  as  shall  seem  necessary  and  convenient  for  the 
government  of  the  said  corporation:  Be  it  ordained,  By  the  president, 
directors,  and  company  of  the  Bank  of  the  United  States — 

Sec.  II.  That  the  bank  shall  be  open  for  the  transaction  of  business 
every  day  in  the  year  (Sundays,  Christmas  Day,  and  the  Fourth  of  July 
excepted)  during  such  hours  as  the  board  of  directors  shall  deem  advisable. 

Sec.  III.  That  the  books  and  accounts  of  the  bank  shall  be  kept  in 
dollars  and  cents,  and  shall  be  regularly  balanced  on  the  first  Mondays  in 
January  and  July  in  each  year,  when  the  half-yearly  dividends  shall  be 
declared  and  published  in  at  least  four  of  the  public  newspapers. 

Sec.  IV.  That  the  bank  shall  take  charge  of  the  cash  of  all  those  who 
choose  to  place  it  there  (free  of  expense)  and  shall  keep  it  subject  to  their 
order,  payable  at  sight;  and  shall  receive  deposits  of  ingots  of  gold,  bars 
of  silver,  wrought  plate,  or  other  valuable  articles  of  small  bulk,  in  the 
same  manner,  and  return  them  on  demand  of  the  depositor. 

Sec.  V.  That  the  bank  shall  receive  all  specie,  coins  according  to  the 
rates  and  value  that  have  been  or  shall  hereafter  be  established  by  Congress. 

Sec.  VI.  That  until  offices  of  discount  and  deposit  shall  be  established, 
there  shall  be  at  least  two  days  in  every  week,  when  meetings  of  the  board 
of  directors  shall  be  assembled.  Discounts  shall  be  made  at  a  rate  not 
exceeding  6  per  cent  per  annum  on  notes  or  bills  of  exchange  that  have 
not  more  than  sixty  days  to  run,  and  with  at  least  two  responsible  names, 
and  under  such  modifications,  as  the  board  of  directors  in  their  discretion 
shall  deem  satisfactory  and  expedient. 

Sec.  VII.  That  the  president  shall  have  power  to  convene  the  directors 
on  special  occasions,  and  with  the  approbation  of  the  board  of  directors,  to 
assemble  and  affix  the  seal  of  the  corporation  to  all  conveyances  or  other 
instruments,  and  sign  the  same  in  behalf  of  the  corporation — the  said  seal 
shall  always  remain  in  the  custody  and  safekeeping  of  the  president. 

Sec.  VIII.  That  a  committee  of  the  board,  consisting  of  at  least  three 
members  to  be  elected  monthly  by  ballot,  shall  visit  the  vaults  in  which 


I33 


National  Monetary  Commission 


the  cash  and  other  effects  shall  be  deposited  at  least  once  in  every  month, 
and  make  an  inventory  of  the  same,  to  be  compared  with  the  books,  in 
order  to  ascertain  whether  they  perfectly  agree  therewith. 

Sec.  IX.  That  no  notes  of  the  bank  shall  be  struck  or  signed,  or  bank 
paper  made,  but  by  the  direction  of  the  board. 

SEC.  X.  That  in  case  the  board  of  directors  shall  at  any  time  make  a 
dividend  exceeding  the  profits  of  the  bank  and  thereby  diminish  capital 
stock,  the  members  assenting  thereto  shall  be  liable  in  their  several  indi¬ 
vidual  capacities  for  the  amount  of  the  surplus  so  divided. 

SEC.  XI.  That  the  board  of  directors  shall,  previous  to  the  first  day  of 
December  in  every  year,  call  a  general  meeting  of  the  stockholders  to  be 
assembled,  within  three  days  after  each  annual  election. 

SEC.  XII.  That  the  board  of  directors  are  hereby  empowered  to  demand 
and  receive  from  the  commissioners  appointed  to  superintend  the  sub¬ 
scriptions  to  the  capital  stock  of  the  bank,  all  moneys  which  have  been  paid 
to  the  said  commissioners  on  account  of  the  first  specie  payment,  together 
with  the  original  book  of  subscription. 

Sec.  XIII.  That  the  board  of  directors  are  hereby  authorized  to  ascer¬ 
tain  and  determine  in  what  manner  the  remaining  portions  of  the  capital 
stock,  due  on  the  shares  subscribed,  consisting  of  specie  and  public  debt, 
shall  be  paid  and  received,  and  they  are  hereby  further  authorized  and 
empowered  to  receive  into  their  possession  the  certificates  of  said  public 
debt,  and  demand  and  receive  by  their  president,  or  in  such  other  manner 
as  they  shall  think  proper,  the  interest  that  shall  accrue  and  become  due  on 
the  same,  and  to  give  receipts  therefor  in  behalf  of  the  said  corporation. 

Sec.  XIV.  That  the  board  of  directors  are  hereby  authorized  and 
empowered- to  fix  and  establish  requisite,  safe,  and  convenient  forms  for 
transferring  bank  stock;  for  receiving  half-yearly  dividends;  for  conveying 
a  right  to  proxies  to  represent  stockholders  at  any  general  meeting  after  the 
second  Monday  of  January  next;  for  the  certificates  of  capital  stock  of  the 
bank;  for  the  circulating  and  post  notes  of  the  bank;  and  for  the  oath  or 
affirmation  of  the  officers  of  the  bank,  previous  to  their  entering  on  the 
execution  of  their  respective  duties. 

Sec.  XV.  That  the  board  of  directors  are  hereby  authorized  and  empow¬ 
ered  to  establish  a  common  seal,  with  suitable  devices;  to  ascertain  and 
mark  out  the  various  duties  and  employments  of  the  officers,  clerks,  and 
servants  of  the  bank,  and  to  direct  them  accordingly — as  well  as  to  deter¬ 
mine  the  amount  of  securities  they  shall  respectively  give  for  the  faithful 
discharge  of  their  duties;  to  assign  to  the  president  such  additional  func¬ 
tions  as  are  not  already  designated  by  law;  and  to  reissue  or  renew  at  their 
discretion  the  notes  in  circulation. 

Sec  XVI.  That  the  directors  shall  have  power  to  make  loans  to  the 
Government  of  the  United  States,  or  of  any  State,  to  such  extent,  and  on 
such  terms  as  they  shall  deem  expedient,  not  contrary  to  law;  provided 


134 


First  Bank  of  the  United  States 


that  a  board  consisting  of  not  less  than  a  majority  of  the  whole  number 
of  directors  shall  be  necessary  to  decide  in  all  such  cases. 

Sec.  XVII.  That  the  board  of  directors  are  hereby  authorized  to  lease 
or  hire  for  a  term  not  exceeding  two  years  such  suitable  buildings  as  the 
administration  of  the  affairs  of  the  bank  may  require. 

Sec.  XVIII.  That  in  case  it  shall  happen  that  an  election  of  directors 
shall  not  be  made  at  a  meeting  of  the  stockholders  for  that  purpose  on  the 
first  Monday  of  January  next,  and  on  said  day  in  each  succeeding  year,  it 
shall  be  lawful  for  the  stockholders  to  adjourn  said  meeting  to  any  future 
day  within  five  days  from  the  said  first  Monday  of  January,  and  at  said 
adjournment  to  make,  complete,  and  finish  said  election. 

Sec.  XIX.  That  the  board  of  directors  are  hereby  empowered  to  form 
and  establish  all  other  rules  and  regulations  that  they  may  deem  necessary 
for  the  interior  management  of  the  bank. 

On  motion,  resolved,  That  it  is  the  sense  of  the  stockholders  of  the  Bank 
of  the  United  States,  that  the  president  and  directors  should  turn  their 
immediate  attention  to  the  establishment  of  offices  of  discount  and  deposit 
at  such  places  in  the  United  States  as  the  interest  and  safety  of  the  insti¬ 
tution  will  admit.0 

Attest: 

Edward  Fox,  Secretary. 


“Dunlap’s  American  Daily  Advertiser,  November  14,  1791. 


« 


135 


Appendix  C. 


$ 

Quotations  of  Bank  Stocks.. 


Date. 

Bank  of 
the  United 
States. 

Bank  of 
North 
America. 

Bank  of 
Pennsyl¬ 
vania. 

Bank  of 
Phila¬ 
delphia. 

August  22,  1792  _  _ _ 

ISO 

130 

November  6,  1792 

142 

1 33 

Tanuarv  1703 -  _ 

135 

130 

January  4,  1794-  _ 

I  IO 

120 

108 

January  2.  i79<__  _  _ 

1 26 

140 

1 26 

January  16,  1795 

145 

145 

140 

February  15,  1796 

130 

146 

130 

February  14,  1797  _  _  _ 

I  12 

145 

I  13 

January  10,  1798  _  __ 

0123 

150 

124 

January  1,  1800  _ _ 

124 

150 

124 

December  20,  1800 _  _ 

139 

153 

134 

January  17,  1801 

133 

147 

126 

August  2,  1802 _ _ 

153 

15 1 

141 

January  1,  1803- 

147% 

134 

134 

March  10,  1804 _  .  _ 

148 

143 

♦  125 

113 

May  18,  1805 _ _ 

132 

13s 

130 

96 

January  4,  1806 

*3 1 

13134 

128M 

104 

December  21,  1807 _ 

123K 

145 

134 

123 

January  26,  1808 _ 

119 

145 

134 

123 

May  2i,  1808 _  . 

130 

140 

140 

127 

January  5,  1809  --  _ 

12714 

145 

145 

136 

January  22,  1810 

127 

147 

141 

136 

April  2,  1810 _  _ 

III 

146 

140 

133 

December  19,  18x0 _ 

ns 

149K 

137 

129 

J  anuary  15,  1811 _ 

0  1 13 

January  28,  1811 _ 

107 

April  2,  181 1  _ _ _ _ 

90 

December  30,  1811 _ 

95  34 

April  9,  1812 _ 

92 

June  8,  1812 _  _ 

94 

j  * 

1 

®  Dividend  off. 


136 


Appendix  D 


Dividends. 


Year. 

Bank  of  the  United 
States. 

North 

America 

Philadel¬ 

phia. 

Pennsyl¬ 

vania. 

J  anuary 

July. 

Per  cent. 

Per  cent 

Per  cent. 

Per  cent. 

6 

1  /  °  / - 

1788 

6 

7 

1  /oy - 

7 

1  /yu - 

7 

1  /  y 1 - 

4 

15 

- 

4 

3^ 

13 

1  /  Vj - 

3  Vi 

4 

1 2 

1  /  y  4 - 

4 

4 

12 

x  /  vo - 

1  7q6 

4 

4 

1 2 

• 

I  7Q7 

4 

4 

1  2 

5 

4 

I  2 

I  7QQ 

4 

4 

1 2 

4 

4 

10 

6 

4 

10 

<»8 

t 

4H 

43^ 

10 

4M 

4 

9  Vs 

1804. 

4  M 

4 

9 

8 

1805 - 

4 

4 

9 

8 

1806 _  — 

4 

4 

9 

8 

1807.  _  __  .  _ 

6 

4 

9 

8 

, 

4 

4 

9 

8 

4 

4 

9 

8 

4 

4 

9 

8 

i8t  T 

4 

4 

a  The  third  dividend  was  io  per  cent;  fourth,  fifth,  and  sixth,  g^a  percent;  thirteenth 
to  nineteenth,  9  per  cent. 


137 


Appendix  E. 


Records  and  Accounts  op  the  First  Bank  op  the 

United  States. 

The  scantiness  of  data  relating  to  the  first  Bank  of  the 
United  States,  especially  of  reports  of  its  condition,  has 
long  been  regretted  by  historians  and  investigators. 
Though  there  are  indisputable  evidences  that  the  bank 
made  frequent  reports  to  the  Treasury  Department,  only 
two  apparently  have  been  preserved.  The  Treasury  offi¬ 
cials  now  in  charge  of  the  records  and  archives  share  the 
opinion  expressed  in  Professor  Dunbar ’s  subjoined  article 
that  if  any  of  these  reports  were  in  existence  at  the  time  of 
the  fires  in  1814  and  1833  they  were  probably  destroyed. 

In  undertaking  a  study  of  the  first  Bank  of  the  United 

States,  however,  it  was  hoped  that  a  diligent  search  might 

reveal  some  old  records,  diaries,  or  other  data,  which  would 

throw  additional  light  upon  its  methods  and  practices.  It 

was  thought  that  the  papers  and  documents  of  the  bank, 

after  its  business  and  the  bank  building  were  purchased  by 

Stephen  Girard,  might  have  passed  into  his  possession  and 
* 

have  been  preserved  either  among  his  private  papers,  now 
in  the  possession  of  the  Girard  estate,  or  among  the  old 
records  of  the  Girard  National  Bank,  which  was  organized 
as  a  state  bank  in  1832  to  fill  the  financial  gap  caused  by 
Girard’s  death  and  the  liquidation  of  his  bank.  These 
possible  sources,  however,  proved  fruitless.  The  Girard 
National  Bank  has  no  records  relating  to  the  old  bank; 
while  the  superintendent  of  the  Girard  estate,  who  is 
having  Girard’s  papers  classified  and  catalogued,  believes 


138 


First  Bank  of  the  United  States 


that  the  collection  contains  no  material  of  value  on  this 
subject. 

Through  the  officers  of  the  Pennsylvania  Historical 
Society  inquiry  was  made  to  ascertain  whether  any  of  the 
old  bank  records  had  passed  into  the  possession  of,  and  had 
been  preserved  by,  descendants  of  Willing,  Simpson,  and 
others  directly  connected  with  the  bank.  This  line  of 
inquiry,  too,  proved  unfruitful.  A  careful  reading  of  the 
newspapers  and  pamphlets  for  the  entire  period  of  the 
bank’s  existence  furnished  considerable  new  material, 
especially  for  the  first  few  years  of  its  history.  The  old 
minute  books  and  records  of  the  Bank  of  North  America, 
which  were  made  accessible  through  the  courtesy  of  Presi¬ 
dent  Michener,  contained  some  valuable  data,  but  this  is 
the  only  bank  which  was  contemporary  with  the  first 
Bank  of  the  United  States  whose  records  have  yielded 
much  material  for  this  study.  Extensive  use  has  been 
made  of  the  Finance  folios  in  the  American  State  Papers, 
as  well  as  the  works  and  writings  of  Hamilton,  Gallatin, 
Jefferson,  and  other  public  men  of  the  time. 

Professor  Dunbar’s  article  on  the  “Accounts  of  the  First 
Bank  of  the  United  States”  follows: 

“The  first  Bank  of  the  United  States  was  obliged  by  its 
charter  to  report  its  condition  to  the  Treasury  Department 
as  often  as  required,  not  exceeding  once  a  week.  It  is 
well  known  that  Mr.  J.  J.  Knox,  when  Comptroller  of  the 
Currency,  found  that  the  existing  records  do  not  show  that 
any  formal  reports  were  ever  made.  Two  balanced  state¬ 
ments  were  given  to  Congress  by  Mr.  Gallatin,  one  in 
March,  1809,  and  the  other  in  January,  1811;  and  it  has 
sometimes  been  assumed  that  these  were  the  only  reports 
ever  made. 


139 


N  at i o n a  l  M  o  n  et  ar  y  Commission 


“That  Mr.  Knox’s  search  in  the  Treasury  Department 
brought  no  reports  to  light  proves  but  little.  The  Treas¬ 
ury  Department,  it  will  be  recollected,  was  burned  when 
Washington  was  occupied  by  the  British  forces  in  August, 
1814;  and  it  was  burned  again  in  March,  1833.  The 
official  statements  made  to  Congress  as  to  the  documents 
and  books  lost  and  saved  on  these  two  occasions  raise  a 
presumption  that  any  such  reports,  if  in  existence  at  the 
time  of  either  conflagration,  would  not  have  been  among 
the  papers  saved,  the  effort  being  made  in  both  cases  to 
save  primarily  what  was  needed  for  the  current  public 
service.  The  failure,  therefore,  to  discover  at  the  present 
time  a  set  of  papers,  which  even  in  1814  had  only  an 
historical  value,  can  not  be  regarded,  under  the  circum¬ 
stances,  as  having  any  weight. 

“  There  are,  however,  many  pieces  of  evidence  scattered 
in  the  public  documents  tending  to  show  that  the  bank  was 
required  by  the  Treasury  Department  to  make  frequent 
report  of  its  condition,  and  that  it  did  so  in  obedience  to 
the  law. 

“  The  most  complete  account  which  we  have  is  that  which 
was  sent  to  the  House  in  January,  1811,  as  above  stated, 
and  is  given  in  State  Papers  on  Finance.  (Vol.  II,  p. 
468.)  This  statement,  made  in  much  detail,  is  said  by 
Mr.  Gallatin  in  the  letter  communicating  it  to  be  ‘ex¬ 
tracted  from  the  latest  returns  received  at  this  office  from 
the  bank.’  It  was  then  one  of  a  series.  The  return  of 
1809  above  referred  to  (ibid.,  p.  352),  although  a  balanced 
account,  is  given  in  round  numbers  and  has  been  stigma¬ 
tized  as  an  account  ‘trumped  up;’  but  Mr.  Gallatin’s 
letter  transmitting  it  states  expressly  that  the  amount  of 


140 


First  Bank  of  the  United  States 

the  principal  items  ‘  is  taken  on  a  medium  ’ — that  is,  it 
is  an  averaged  account,  and  no  more  ‘  trumped  up  ’  than 
the  averaged  accounts  now  published  weekly  by  the  clear¬ 
ing-house.  Mr.  Gallatin’s  language  shows  that  he  pre¬ 
ferred  to  give  an  averaged  account,  because  it  better 
represented  the  ordinary  condition  of  the  bank  than  the 
actual  figures  at  the  date  of  his  report;  and,  as  the  ques¬ 
tion  before  Congress  related  to  a  renewal  of  the  charter,  it 
was  the  ordinary  condition  of  the  bank  which  Congress 
most  needed  to  understand.  P'or  the  present  purpose, 
however,  the  important  point  is  that,  in  making  a  state¬ 
ment  ‘taken  on  a  medium,’  Mr.  Gallatin  probably  had 
before  him  the  various  detailed  statements  of  which  this 
medium  is  the  average.  In  one  other  instance  we  have 
direct  evidence  that  an  account  of  the  bank  was  in  posses¬ 
sion  of  the  Government.  In  Gallatin’s  Writings  (Vol.  I, 
p.  59) ,  Jefferson  writes  to  Gallatin,  November  11,  1801, 
giving  a  comparative  table  of  certain  items  in  the  accounts 
of  the  Bank  of  the  United  States  and  of  banks  in  several 
of  the  principal  cities.  If  we  take  the  items  relating  to  the 
Bank  of  the  United  States  and  arrange  them  in  their 
proper  form,  we  find  that  they  make  up  an  account  as 
follows : 


Liabilities. 

Resources. 

Capital _  .  _  $10,000,000 

Undivided  profits.  _  .  .  40,000 

Notes _  .  .  5,200,000 

Deposits: 

Government  _  3.560,000 

Individual _  5,240,000 

Discounts _  $12,150,000 

Six  per  cent  and  advance  to 

Government.  .  ...  5,460,000 

Due  from  banks _  _  1,450, 000 

Specie.  _  5,000,000 

24, 040, 000 

24, 060, 000 

141 


N  a  tional  M  o  n  et  a  r  y  Commission 


“  It  is  sufficiently  evident  that  Jefferson  in  this  case  had 
a  balanced  account  of  the  bank  which  he  simplified  by 
throwing  off  the  thousands,  this  process  causing  the  dis¬ 
crepancy  which  appears  in  the  totals  of  debit  and  credit. 

“Besides  these  references  to  other  statements  than 
those  now  known  to  exist,  there  are  numerous  significant 
allusions  to  be  found  in  Gallatin’s  correspondence  and 
in  the  debates  in  Congress  upon  the  proposed  renewal  of 
the  charter.  Thus,  in  Gallatin’s  ‘  Writings  ’  (Vol.  I,  p  .80), 
we  have  Gallatin  in  June,  1802,  comparing  the  condition 
of  the  Bank  of  Pennsylvania  with  that  of  the  Bank  of 
the  United  States.  To  cite  only  one  passage  from  the 
debates,  we  find  Mr.  Finley,  on  April  30,  1810,  saying  in 
the  course  of  his  speech  that  ‘  the  Secretary  of  the  Treas¬ 
ury  has,  for  the  time  being,  had  authority  by  law  to 
inspect  the  directors  of  the  bank,  and  did  do  it,  and 
obtained  weekly  returns  of  its  situation.’  In  Gallatin’s 
communication  to  the  House,  January  10,  1811,  in  ‘State 
Papers  on  Finance  ’  (Vol.  II,  p.  460),  there  are  significant 
references  to  ‘the  returns  made  to  the  Treasury,’  and 
‘the  official  statements  transmitted  in  conformity  with 
*  *  *  the  charter,’  and  the  like.  And  in  Mr.  Gal¬ 

latin’s  well-known  ‘Considerations  on  the  Currency  and 
Banking  System,’  published  in  1831,  we  find  him  making 
a  general  statement  as  to  the  proportion  which  the  loans 
made  and  stocks  owned  by  the  bank  bore  to  its  capital 
for  the  whole  of  its  existence — a  statement  which  a  man 
of  his  caution  never  made  without  full  documentary 
evidence.  In  short,  there  is  ample  reason  to  believe 
that  when  the  stockholders  declared  in  their  petition 


142 


First  Bank  of  the  United  States 


for  a  renewal  of  the  charter,  in  April,  1808,  ‘  that  the  con¬ 
fidence  of  the  Government  (was)  founded  upon  a  con¬ 
stant  knowledge  of  the  interior  management  and  condi¬ 
tion  of  the  bank,  ’  they  told  the  truth.  Indeed,  it  is 
inconceivable  that  they  should  have  made  this  statement 
to  a  Congress  in  which  their  opponents  had  the  majority, 
if  there  had  been  any  possibility  of  a  denial. 

‘That  the  accounts  given  to  the  Treasury  Department 
were  not  made  public,  as  they  would  be  in  our  own  day, 
is  not  surprising  when  we  see  the  different  views  then 
commonly  held  as  to  giving  publicity  to  such  statements. 
For  example,  in  Jefferson’s  letter  of  November,  1801, 
referred  to  above,  it  will  be  observed  that  he  suggested 
that  statements  from  the  state  banks  should  be  gener¬ 
alized,  and  the  total  of  the  yearly  average  should  be 
presented  to  Congress.  ‘  It  would  give  us,’  he  says, 
‘the  benefit  of  their  and  of  the  public  observations  and 
betray  no  secret  as  to  any  particular  bank.’  And  it  will 
be  recollected  that  at  that  period  the  Bank  of  England, 
on  which  the  Bank  of  the  United  States  was  closely 
modeled,  made  no  publication  of  its  accounts,  and  that 
it  was  not  until  1834  that  even  a  quarterly  statement 
was  required  to  be  made.  In  the  earlier  part  of  the 
century  the  public  could  learn  nothing  as  to  the  condition 
of  the  bank,  except  the  selected  facts  cautiously  given 
out  in  parliamentary  investigations.  Mr.  Tooke,  in  his 
evidence  before  the  committee  of  1832,  in  ‘  Parliamentary 
Documents,’  1831-32  (Vol.  VI),  described  the  accounts 
thus  given  of  the  cash  held  by  the  bank  at  some  critical 
periods  as  ‘mystical;’  and  some  important  witnesses, 


143 


N  at  io  n  a  l  M  on  et  ar  y  Commission 


even  in  1832,  maintained  that  to  give  the  bank  accounts 
to  the  public,  especially  to  state  the  amount  of  bullion 
held,  might  be  a  mischievous  practice.  It  is  not  surpris¬ 
ing  then  that  the  accounts  of  the  first  Bank  of  the  United 
States  down  to  18 11  were  regarded  as  confidential.  That 

under  the  seal  of  confidence  they  were  regularly  made 
from  an  early  period  and  probably  for  the  whole  of  the 

bank’s  existence  seems  to  be  more  than  probable.”® 
a  Quarterly  Journal  of  Economics,  Vol.  VI,  p.  471. 


144 


The  Second  United  States  Bank 


By 


DAVIS  R.  DEWEY,  Ph.  D. 

Massachusetts  Institute  of  Technology 


7069 — IO 


IO 


145 


THE  SECOND  UNITED  STATES 

BANK. 


PREFACE. 

In  the  following  report  on  the  Second  Bank  of  the 
United  States,  I  have  not  attempted  to  present  a  complete 
history  or  to  cover  every  phase  of  the  bank’s  activity. 
This  has  been  most  satisfactorily  achieved  by  Professor 
Catterall;  his  monograph,  “The  Second  Bank  of  the 
United  States  ” a  is  based  on  a  collection  of  material, 
including  Biddle’s  private  papers,  hitherto  inaccessi¬ 
ble,  and  is  characterized  by  searching  analysis  and 
sober  judgment.  Professor  Sumner  has  also  treated 
the  subject  at  length  in  his  “Life  of  Jackson,”  and  in 
Volume  I  of  “  History  of  Banking  in  all  Nations.”  I  wish, 
therefore,  at  the  outset,  to  express  my  indebtedness  to 
these  two  writers,  and  more  particularly  to  the  former, 
who  enjoyed  the  use  of  sources  unavailable  to  the  latter. 
Although  personally  I  have  examined  with  care  all  the 
Congressional  documents  which  relate  to  the  bank,  in¬ 
cluding  reports  and  debates,  a  large  part  of  this  labor  has 
necessarily  been  of  a  perfunctory  character,  because  the 
trail  had  been  previously  so  carefully  blazed  by  Professor 
Catterall. 

An  especial  effort  has  been  made  to  set  forth  the  reasons 
for  the  establishment  of  the  bank,  the  mistakes  which  it 
made  at  the  beginning  of  its  career,  its  operations  under 
more  conservative  guidance,  the  reasons  for  its  downfall, 
and  more  particularly  at  every  stage  the  kind  of  work 
which  it  performed  in  the  general  field  of  banking.  Espe- 

a Published  by  the  University  of  Chicago  Press,  ppP  xiv,  538  (1903). 

147 


N  at i o n a l  M  on  et  ar  y  Commission 


dally  have  I  endeavored  to  include  those  operations  which 
might  be  concerned  in  the  discussion  of  a  central  bank  at 
the  present  time. 

Although  a  preface  does  not  ordinarily  present  con¬ 
clusions,  it  may  not  be  improper  to  advise  the  reader  in 
advance  that  the  circumstances  which  gave  rise  to  the 
establishment  of  the  Second  Bank  were  altogether  different 
from  those  which  have  brought  about  a  discussion  of  the 
question  of  a  central  bank  at  the  present  juncture;  that 
"the  bank  in  its  final  operations  was  nothing  more  or  less 
than  a  large  commercial  bank  with  practically  the  same 
functions  as  other  banks  established  under  state  charters, 
and  differed  from  them  in  little  save  size  and  enjoyment 
of  a  few  special  privileges;  that  the  bank  began  its  opera¬ 
tions  during  a  period  of  commercial  demoralization  and 
developed  its  practice  during  a  period  of  crude  banking 
methods,  as  measured  by  current  standards;  and  finally, 
that  the  bank  in  its  closing  years,  was  subject  to  a  political 
attack,  violent,  indiscriminating,  and  even  unscrupulous 
sin  its  character.  It  is  difficult,  therefore,  to  find  in  the 
experience  of  this  institution,  any  lessons  of  importance 
which  may  be  of  special  service  in  the  preparation  of  a 
plan  for  a  large  national  central  bank  at  a  later  period, 
when  business  methods  have  been  transformed  by  the 
railroad,  the  telegraph,  and  by  the  development  of  cor¬ 
porate  enterprise,  to  say  nothing  of  the  change  in  banking 
law  through  the  general  substitution  of  national  super¬ 
vision  for  state  control. 


\ 


148 


THE  SECOND  UNITED  STATES  BANK. 


DEBATE  ON  PLANS. 

The  embarrassments  of  the  money  market  in  less  than 
three  years  after  the  dissolution  of  the  First  United  States 
Bank  in  1811  revived  a  demand  for  the  establishment  of  a 
similar  institution.  On  January  4,  1814,  a  petition  from 
New  York  was  presented  “  praying  for  the  incorporation  of 
a  national  bank,  with  a  capital  of  $30,000,000.” a  The 
Committee  on  Ways  and  Means  reported  adversely,  on 
the  ground  that  it  was  unconstitutional  to  “create  cor¬ 
porations  within  the  territorial  limits  of  the  States 
without  the  consent  of  the  States.”* 6  Discussion,  how¬ 
ever,  did  not  die  out,  and  proposition  after  proposi¬ 
tion  followed  in  rapid  succession.  Calhoun  proposed 
the  establishment  of  a  bank  in  the  District  of  Columbia;0 
but  this  was  open  to  the  objection  that  it  would  not 
furnish  a  national  currency  unless  branches  in  the 
several  States  were  permitted;  nor  was  this  indirect 
method  of  extending  the  operations  of  the  bank  over 
the  whole  country  acceptable  to  the  advocates  of  strict 
construction  in  favor  of  state  supremacy. d  When  Con¬ 
gress  met  in  special  session  in  September,  1814,  the  situ- 

«  Annals  of  Congress,  13th  Cong.,  I,  844. 

&  Ibid.,  I,  873. 
clbid.,  I,  1235. 
dCatterall,  8. 


Y 


149 


I 


National  Monetary  Commission 

\ 

ation  had  been  aggravated  by  the  suspension  of  specie 
payments  in  the  previous  month.  A  new  and  more 
vigorous  Secretary  of  the  Treasury,  Dallas,  succeeded 
Campbell,  and  announced  without  delay  that  a  national 
bank  was  “the  only  efficient  remedy  for  the  disordered 
condition  of  our  circulating  medium.”® 

The  Committee  on  Ways  and  Means  thereupon  promptly 
reported  a  bill  for  the  establishment  of  a  bank  founded  on 
specie  and  government  war  stock.  Among  its  provisions 
was  the  grant  of  power  to  the  President  of  the  United 
States  to  suspend  specie  payments  when  such  suspension 
seemed  necessary.6  “Opposition  came  from  three  quar¬ 
ters:  From  the  strict  constructionists,  a  meager  band; 
from  the  Federalists,  able,  noisy,  persistent,  and  bitterly 

aggrieved  by  the  provision  to  limit  stock  subscriptions  to 

*  • 

war  stock ;  and  from  those  members  of  the  Republican 
party  who  were  willing  to  charter  a  bank,  but  wished 
one  of  a  different  character.  This  party  was  respectable 
in  size,  most  ably  led  by  Calhoun  and  Lowndes,  and 
supported  by  Speaker  Cheves.”  c  Calhoun  consequently 
introduced  a  bill  providing  for  a  bank  with  a  capital  of 
$50,000,000  founded  on  specie  and  treasury  notes,  with  no 
authority  for  the  suspension  of  specie  payments.  At  first, 
this  plan  prevailed  over  that  of  the  administration/  but 
further  divisions  soon  appeared  among  the  Republicans. 
Some  wanted  a  bank  with  less  capital,  and  Dallas  argued 
that  the  nation’s  credit  under  Calhoun’s  plan  would  not  be 

“Annals  of  Congress,  13th  Cong.,  Ill,  400-409. 

frlbid.,  Ill,  404-406. 

c  Catterall,  1 1. 

d  Annals  of  Congress,  13th  Cong.,  Ill,  613. 


150 


The  S  e  con  d  u  n  it e  d  St  ates  Bank 


strengthened. a  Efforts  to  pass  a  bill  consequently  failed  in 
the  House.  The  Senate  thereupon  passed  a  bill  in  harmony 
with  the  proposals  of  Dallas.  Again  the  House  took  up 
the  discussion,  but,  by  the  Speaker’s  vote,  the  bill  was  lost. 

Dallas,  however,  insisted  upon  action  and  the  bill  was 
reconsidered.*  6  A  compromise  measure  was  the  result,  pro¬ 
viding  for  a  bank  with  a  capital  of  $30,000,000 — $5,000,000 
in  specie,  $10,000,000  in  war  stock,  and  $15,000,000  in 
Treasury  notes.  No  provision  was  made  for  suspension, 
and  the  Government  did  not  participate. c  This  bill  passed 
the  House  and  was  forced  through  the  Senate.  It  now 
met  the  disapproval  of  President  Madison,  who  returned 
a  veto  on  the  ground  that  the  proposed  bank  would  not 
revive  the  public  credit,  provide  a  national  medium  of 
circulation,  or  aid  the  Treasury  by  facilitating  anticipa¬ 
tions  of  revenue,  or  afford  more  durable  loans. d  Fortu¬ 
nately  at  this  juncture  the  war  came  to  an  end,  and  as  there 
was  no  longer  need  of  founding  a  bank  for  the  main  object 
of  procuring  loans,  the  grounds  for  opposition  between 
Calhoun  and  Dallas  were  largely  removed. 

“The  prime  necessity  now  was  to  settle  the  currency, 
which  remained  in  the  utmost  disorder,  and  to  resume 
specie  payments.  Had  it  been  possible  to  persuade  the 
state  banks  to  take  steps  looking  to  resumption,  it  is  con¬ 
ceivable  that  the  administration’s  advocacy  of  a  national 
bank  would  have  ceased.  But  this  was  not  possible. 
Dallas,  therefore,  again  proposed  that  a  national  bank  be 

“Annals  of  Congress,  13th  Cong.,  Ill,  652-654. 

&  Dallas,  Life  of  Dallas,  138-139;  Catterall,  15. 
c  Annals  of  Congress,  13th  Cong.,  Ill,  1039-1040;  Catterall,  15. 
d  Messages  and  Papers,  1:  555. 

151 


N  at  io  n  a  l  M  o  n  et  ar  y  Commission 


established.”®  Once  more  he  maintained  that  the  state 
banks  could  not  successfully  be  employed  to  furnish  a 
uniform  national  currency,  for  the  attempt  to  associate 
them  for  that  purpose  had  failed;  another  attempt  to 
use  their  agency  for  the  circulation  of  Treasury  notes  had 
been  only  partially  successful,  and  a  proposed  plan  to 
fix  public  confidence  in  the  administration  of  the  banks 
by  curtailing  their  circulation  and  to  give  each  bank 
a  legitimate  share  in  the  circulation  was  not  likely  to 
receive  the  general  sanction  of  the  banks.6  The  Gov¬ 
ernment  was  not  in  a  position  to  force  the  banks.  A 
refusal  on  its  part  to  receive  bills  of  non-specie  paying 
banks  would  be  “to  visit  the  sins  of  the  banks  upon  the 
great  mass  of  unoffending  citizens,  unless  the  Government 
was  prepared  to  furnish  a  sufficient  legal  currency  to  meet 
the  indispensable  demands  of  the  community.”0  Presi¬ 
dent  Madison  also,  in  his  annual  message,  favored  a  bank. 

On  January  8,  1816,  a  new  bill  was  reported  providing 
for  a  bank  with  charter  provisions  similar  to  those  of  the 
First  Bank.  The  capital  was  increased  to  $35,000,000, 
but  the  proportion  of  government  subscription  remained 
the  same.  After  a  few  amendments  the  measure  passed 
in  the  House  by  a  vote  of  80  to  71  and  in  the  Senate  by 
22  to  12. d 

In  brief,  the  charter  included  the  following  provisions: 
Capital,  $35,000,000,  in  shares  of  $100  each,  one-fifth,  or 

a  Catterall,  17. 

b  Report  of  Secretary  of  Treasury,  Dec.,  1815;  summarized  by  Gallatin, 
Amer.  Quart.  Rev.,  Dec.,  1830,  p.  483. 

c  Letter  of  Crawford  to  Jones,  Nov.  29,  1816;  Finance,  3:  316. 

d  Dewey,  Financial  History  of  the  U.  S.,  145-150. 


152 


The  S  e  con  d  u  nit  ed  States  Bank 


$7,000,000,  to  be  subscribed  by  the  Government,  and 
four-fifths,  or  $28,000,000,  by  individuals,  companies,  or 
corporations;  no  one  individual,  company,  corporation, 
or  State  to  subscribe  for  more  than  $300,000,  and  such 
subscription  to  be  made  payable  in  installments  extending 
over  one  year,  one-fourth  in  specie  and  three-fourths  in 
specie  or  funded  debt  of  the  Government. 

The  charter  ran  for  twenty  years,  and  gave  the  bank 
power  to  hold  property  “of  whatsoever  kind,  nature,  and 
quality/’  not  exceeding  $55,000,000,  including  the  capital. 
The  management  was  placed  in  the  hands  of  25  directors, 
5  to  be  appointed  annually  by  the  President  of  the  United 
States,  of  whom  not  more  than  3  were  to  be  resident  of 
any  one  State,  and  20  were  to  be  elected  annually  by  the 
stockholders  under  a  system  of  qualified  or  restricted 
voting  whereby  no  person  could  have  more  than  30  votes. 
No  director  could  be  director  in  any  other  bank;  and  not 
more  than  three-fourths  of  the  directors  elected  by 
stockholders  and  not  more  than  four-fifths  of  those 
appointed  by  the  President  were  to  be  reeligible  for 
election  for  the  next  succeeding  year;  this  restriction 
however,  was  not  to  apply  to  the  president.  Not  less 
than  7  directors  should  constitute  a  board  for  the  trans¬ 
action  of  business,  and  no  director  was  to  receive  any 
emolument;  60  stockholders — holders  of  at  least  1,000 
shares — should  have  power  to  call  a  special  meeting  of 
the  stockholders;  the  cashier  to  give  bond  for  at  least 
$50,000.  The  holding  of  real  estate  was  limited  to  that 
requisite  for  the  transaction  of  business,  and  such  as 
shall  have  been  mortgaged  for  security  or  conveyed  in 


153 


National  M  o  n  et  a  r  y  Commission 


satisfaction  of  debts.  Indebtedness,  excluding  deposits, 
was  not  to  exceed  $35,000,000;  in  case  of  excess,  the 
directors  to  be  liable  in  their  private  capacities.  The 
bank  could  deal  only  in  bills  of  exchange,  gold  or  silver 
bullion,  or  in  the  sale  of  goods  pledged  for  loans,  and  not 
to  purchase  any  public  stock.  No  loan  was  to  be  made 
on  account  of  the  Government  of  the  United  States  for 
more  than  $500,000,  or  of  any  particular  State  for  more 
than  $50,000.  All  bills  and  notes  under  $100  were  made 
payable  on  demand,  and  larger  bills  for  a  term  not 
exceeding  sixty  days;  no  note  to  be  issued  for  less  than 
$5.  Offices  of  discount  were  to  be  established  in  the 
District  of  Columbia  or  upon  application  of  the  legisla¬ 
ture  in  any  State  in  which  2,000  shares  were  held,  or  in 
any  place  wheresoever  the  managers  might  deem  fit.  For 
such  branches  the  boards  of  directors  and  presidents  were 
to  be  appointed  by  the  directors  of  the  central  bank. 
Periodical  statements  not  exceeding  once  a  week  were  to 
be  made  to  the  Secretary  of  the  Treasury,  who  should 
also  have  power  of  inspecting  the  books  of  the  bank. 
Every  three  years  the  bank  should  make  an  exact  state¬ 
ment  of  unpaid  debts  and  surplus  profits.  Notes  issued 
payable  on  demand  were  receivable  in  all  payments  to 
the  United  States  unless  otherwise  directed  by  Congress. 
The  bank  was  obliged  to  furnish  facilities  for  transferring 
public  funds  without  charging  commission  or  claiming 
allowance  on  account  of  difference  in  exchange.  Deposits 
of  public  funds  were  to  be  made  in  the  bank  or  branches, 
“unless  the  Secretary  of  the  Treasury  at  any  time  other¬ 
wise  order  and  direct ;”  in  which  case  the  Secretary  must 


154 


The  Second  United  States  Bank 


lay  before  Congress  the  reasons  for  such  action.  The 
bank  could  not  suspend  specie  payments,  and  in  case  of 
refusal  to  redeem  obligations  in  specie  it  must  pay  12  per 
cent  interest  until  the  demand  was  satisfied.  The  bank 
was  called  upon  to  pay  a  bonus  to  the  Government  of 
$1,500,000  for  the  franchise." 

It  will  be  observed  that  the  control  of  the  Government 
over  the  bank  was  confined  to  the  appointment  or  removal 
of  five  of  the  directors,  the  withdrawal  of  public  deposits, 
the  exaction  of  weekly  statements,  and  the  inspection  of 
its  general  accounts. 

In  providing  for  a  subscription  of  Government  stock 
or  Treasury  notes  to  the  capital,  the  basic  principle  was 
similar  to  that  later  incorporated  into  the  national  bank¬ 
ing  system.  The  essential  difference  between  the  earlier 
and  later  systems  lay  in  the  treatment  of  state  banks. 
The  national  banking  system  was  given  a  monopoly  of 
note  issue,  and  the  problem  of  restoring  bank-note  cur¬ 
rency  to  a  sound  condition  was,  at  least,  simplified.  In 
1816  no  attempt  was  made  to  eliminate  local  bank  issues. 
It  was  believed  that  a  federal  bank  could  not  only  aid  the 
Government,  but  also  assist  the  state  banks  to  recover 
their  stability.  Jefferson  had  suggested  that  local  banks 
be  deprived  of  this  privilege  to  issue  notes;  not,  however, 
to  give  free  play  to  the  issues  of  a  national  bank,  but  in 
the  interest  of  a  greater  circulation  of  Treasury  notes. *  6 
The  task  of  controlling  the  banks  was,  however,  well-nigh 
impossible  to  accomplish.  The  experience  of  the  First 

a 3  Stats.,  266. 

&  Letter  to  Cooper,  Sept,  io,  1814,  Works,  6:  375. 


I55 


N  at  i  on  a  l  M  o  n  e  t  a  r  y  Commission 


Bank,  which  began  its  operations  with  only  $400,000  of 
specie  in  a  total  capital  of  $10,000,000,  could  not  be 
relied  upon  as  a  precedent,  for  it  must  be  remembered 
that  in  1791  there  were  but  few  banks,  that  their  circula¬ 
tion  was  prudently  curtailed,  and  that  later,  when  state 
banks  multiplied,  the  First  Bank  confined  its  operations 

^within  narrow  limits. 

fv 

The  history  of  the  bank,  in  brief,  was  as  follows:  The 
bank  was  chartered  April  10,  1816,  and  on  April  30  Con¬ 
gress  ordered  that  resumption  of  specie  payments  go  into 
effect  on  February  20,  1817.  The  bank  was  quickly 
organized  under  the  presidency  of  Jones  and  began  opera¬ 
tions  in  January,  1817.  Owing  to  mismanagement  Jones 
was  forced  to  resign  in  1818,  and  Fangdon  Cheves  became 
president.  He  held  office  until  1823,  when  he  was  suc¬ 
ceeded  by  Nicholas  Biddle.  In  June,  1829,  Senator 
Woodbury  of  New  Hampshire  brought  complaints  against 
Jeremiah  Mason,  manager  of  the  Portsmouth  branch; 
in  the  following  December  President  Jackson,  in  his 
annual  message,  questioned  the  constitutionality  of  the 
bank  and  accused  it  of  failing  to  establish  a  sound  cur¬ 
rency.  On  April  30,  1830,  a  committee  of  the  House  of 
Representatives  reported  at  length  on  the  points  raised  by 
Jackson,  its  conclusions  being  entirely  favorable  to  the 
bank.  A  Senate  report  was  likewise  friendly.  In  1831 
Senator  Benton  supported  a  resolution  against  recharter¬ 
ing  the  bank.  In  January,  1832,  the  bank  petitioned  for 
recharter,  and  this  was  favorably  acted  upon  by  commit¬ 
tees  of  the  Senate  and  the  House.  A  bill  for  recharter 
was  passed,  but  vetoed  by  Jackson  July  10,  1832.  In  the 


156 


The  S  e  con  d  u  nit  ed  States  Bank 


autumn  of  this  year  Jackson  was  reelected  president,  and 
interpreted  the  vote  as  an  endorsement  of  his  opposition 
to  the  bank.  In  December,  1832,  Jackson  raised  the 
question  whether  the  funds  of  the  Government  were  safe 
in  the  custody  of  the  bank.  An  investigation  was  ordered 
by  the  House,  and  a  majority  report  of  the  Committee  on 
Ways  and  Means  upheld  the  bank.  This  report  was 
adopted  March  2,  1833,  by  a  vote  of  109  to  46.  Notwith¬ 
standing  this  the  President  determined  to  remove  the 
deposits,  and  in  order  to  accomplish  his  purpose  on  Sep¬ 
tember  23  dismissed  Duane,  Secretary  of  the  Treasury, 
who  objected  to  removal,  and  appointed  Taney  in  his 
place.  The  latter  on  September  26  ordered  that  deposits 
henceforth  be  made  in  certain  state  banks.  On  December 
3,  1833,  Taney  reported  his  reasons  for  removal  to  the 
Senate.  In  1836  the  charter  of  the  bank  expired. 


RELATION  TO  STATE  BANKS  IN  RESUMING  SPECIE 

PAYMENTS. 


The  history  of  the  bank  and  the  development  of  public 
opinion  in  regard  to  this  institution  can  not  be  understood 
without  a  careful  consideration  of  its  relation  to  local 
banks  during  the  struggle  for  resumption  of  specie  pay¬ 
ments  in  1817.  Seeds  of  dissension,  jealousy,  and  hos¬ 
tility  were  then  sown  which  the  bank  was  never  able  to 
eradicate.  During  the  period  of  expansion  after  18  n 
and  the  speculative  profits  which  attended  suspension 
and  unwise  legislation,  state  banking  had  assumed  propor¬ 
tions  which  were  beyond  control.  If  the  bank  had  been 
organized  when  commercial  operations  were  normal  and 
banking  methods  were  sound,  the  United  States  bank 


157 


N  at  i  o  n  a  l  M  on  et  a  r  y  Commission 


would  undoubtedly  have  had  a  different  history.  Estab¬ 
lished,  however,  at  the  time  it  was,  after  local  banks  had 
enjoyed  a  free  license  for  their  operations,  it  was  well- 
nigh  impossible  for  it  to  do  its  work  without  clashing 
with  local  and  selfish  interests.  Tfhe  First  Bank  was 
organized  to  aid  public  and  private  credit;  the  Second,  to 
restore  to  the  country  an  orderly  currency  through  the 
resumption  of  specie  payments.  The  burden  was  placed 
upon  the  bank.  Dallas  had  in  vain  attempted  to  hasten 
the  local  banks  toward  resumption,  setting  the  date  at 
February  20,  1817;  and  Congress  in  April,  1816,  had 
passed  a  joint  resolution  declaring  that  after  the  date 
mentioned  all  payments  to  the  United  States  ought  to 
be  made  either  in  gold  or  silver  or  in  treasury  notes,  or 
in  the  notes  of  the  Bank  of  the  United  States,  or  in  notes  of 
banks  payable  and  paid  on  demand  in  specie.05  The  banks 
refused,  postponing  the  date  to  July  1,  and  as  the  Govern¬ 
ment  could  not  compel  the  banks  to  resume,  Secretary 
Crawford,  who  succeeded  Pallas  r-nrged  the  bank  to  use 
its  power.6  Crawford  also  proposed  to  the  banks,  which 
were  at  that  time  public  depositories,  that  if  they  would 
resume  on  the  date  set,  the  public  funds,  as  far  as  pos¬ 
sible,  would  not  be  transferred  to  the  bank  until  July  i.c 
The  replies  were  again  discouraging. 

The  situation  was  full  of  embarrassment.  The  bank 
complained  of  the  local  institutions;  the  latter  were  sus¬ 
picious  of  the  new  establishment,  and  the  Treasury  was 

“Annals  of  Congress,  14th  Cong.,  1  sess.,  I,  440,  919;  3  Stats.,  342; 
other  references  in  Catterall,  23. 

^Crawford  to  Jones,  Nov.  29,  1816;  Finance,  3:317. 

cDec.  20,  1816;  Finance,  4:283. 

158 


The  S  e  con  d  u  nit  e  d  States  Bank 


not  sure  of  the  disinterestedness  .of  either  in  working 
for  the  public  welfare.  Jones,  the  president  of  the  bank, 
complained  “that  the  state  banks,  instead  of  putting 
their  shoulders  to  the  wheel,  indulged  in  the  most  extrava¬ 
gant  expectations  of  relief  in  the  operations  of  the  bank 
and  calculated  upon  replenishing  their  vaults  by  trans¬ 
ferring  to  it  their  debtors,  and  by  this  ingenious  kind  of 
transmutation  convert  their  paper  into  solid  coin.”a 
Crawford,  on  the  other  hand,  referred  to  the  “  unexpected 
taciturnity  of  the  directors  of  the  Bank  of  the  United 
States  upon  every  subject  which  has  been  presented  to 
them  by  the  Treasury  Department.”* 5 

Jones  then  proposed  that  the  Treasury  should  transfer 
all  of  its  balances  to  the  bank  and  its  branches,  thus 
bringing  a  pressure  upon  the  local  institutions  which 
might  induce  them  to  resume.0  He  declared  that  the 
principal  banks  were  rich  in  surplus  funds  and  resources 
which  were  abundantly  sufficient  to  relieve  them  from 
the  reproach  of  delinquency  d  and  that  they  were  with¬ 
holding  from  circulation  the  coin  which  they  had  accumu¬ 
lated  in  their  vaults.  Crawford,  however,  would  not 
give  the  bank  this  power.  As  the  bank  had  declined 
to  accept  state  bank  notes  as  cash,  but  only  as  a  “special 
deposit,”6  he  could  not  indorse  such  a  course  without 
qualifications,  and  consequently  declined  to  transfer  this 
unlimited  privilege  to  the  bank./  The  bank  had  good 
reason  for  declining  to  receive  local  notes  as  cash,  for  if 
it  accepted  such  currency  it  would  be  liable  for  specie 


“Jan.  i,  1817;  Finance,  4: 

5 Jan.  6,  1817;  Ibid.,  4:495. 

c Jan.  9,  1817;  Ibid.,  4=779- 


159 


d  Ibid.,  4:  765. 
e  Ibid.,  4:  764. 
flbid.,  4:496. 


N  at  ion  a  l  M  o  n  et  ar  y  Commission 


when  called  upon  by  the  Treasury,  and  would  subject 
itself  to  the  heavy  penalty  prescribed  in  section  1 7  of  the 
charter  if  it  should  refuse  thus  to  pay.a 

The  serious  question  at  issue  was  whether  there  would 
be  a  sufficient  amount  of  current  legal  money  if  the  bank 
should  attempt  resumption  alone.  Crawford  believed 
that  unless  the  local  banks  could  be  brought  into  an 
arrangement  by  which  their  paper  would  be  received  in 
payment  of  taxes  there  would  not  be  a  large  enough 
volume  of  medium  on  January  20,  in  which  dues  could  be 
paid.6  The  bank,  however,  did  not  take  this  view  and 
was  willing  to  attempt  the  enterprise  single-handed.  By 
a  vote  of  January  9  it  agreed  to  discount  from  February 
20  to  July  1  sixty-day  bills  made  payable  in  specie  or 
notes  of  the  bank,  or  of  specie  paying  local  banks  on  ac¬ 
count  of  revenue  arising  from  imports  in  the  principal 
commercial  cities. c 

Finally,  on  February  1,  after  a  conference  was  held 
with  representatives  of  the  banks  of  New  York,  Phila¬ 
delphia,  Baltimore,  and  Richmond,  the  institutions  in 
those  cities  agreed  to  resumption  at  the  earlier  date.  For 
this,  however,  certain  concessions  had  to  be  made  by  the 
bank.  The  bank  agreed  not  to  force  the  actual  payment 
of  the  Government  balances  which  were  soon  to  be  trans¬ 
ferred  to  its  custody  until  July  1 ;  and  after  that  it  would 
not  call  for  the  payment  of  balances  which  might  thereafter 
accumulate  against  these  institutions  until  discounts  had 
been  made  at  the  Bank  of  the  United  States  to  the  amount 
of  $6,000,000.  Mutual  pledges  of  good  faith  and  friendly 

“Finance,  4:  768.  &  Ibid.,  4: 497.  clbid.,  4: 766. 


160 


The  Second  U  nit  ed  States  Bank 


offices  to  contribute  their  resources  in  case  of  emergencies 
were  also  inter  changed. a  As  Catterall  observes,  this  was 
a  one-sided  agreement,  with  the  advantages  largely  in 
favor  of  the  local  banks.  The  bank  assumed  at  once 
the  responsibility  of  paying  on  a  specie  basis  all  drafts 
which  might  be  drawn  by  the  Government  on  its 
deposits,  and  yet  the  bank  could  not  draw  specie 
from  the  local  banks  by  the  presentation  of  their  notes 
for  redemption  until  July  i.  Moreover,  it  forced  the  bank 
to  make  large  loans  on  the  supposition  that  the  local 
banks  would  reduce  their  discounts  in  order  to  be  enabled 
to  pay  over  the  public  funds.  By  making  these  loans  the 
bank  endangered  its  own  specie  reserve,  since  the  local 
banks  could,  in  accumulating  the  bills  of  the  bank,  drain 
it  of  its  specie.5 

Although  the  bank  thus  promptly  cooperated  to  es¬ 
tablish  a  sound  monetary  medium,  it  did  not  manage  its 
own  affairs  with  discretion.  There  were  three  strong 
reasons  why  it  should  have  exercised  caution:  (i)  There 
was  an  unfavorable  balance  of  trade  due  to  large  impor¬ 
tations  from  England  at  the  close  of  the  war;  (2)  specie 
was  scarce,  due  to  its  hoarding  and  disappearance  through 
the  period  of  suspension;  (3)  the  unstable  position  of 
many  local  banks.  The  bank,  however,  followed  a  short¬ 
sighted  policy.  The  country  had  suffered  so  keenly  from 
the  varying  rates  of  depreciation  of  local  bank  bills  that 
public  attention  was  concentrated  on  the  benefits  to  be 
derived  from  the  equalization  of  exchange.  The  bank 
accepted  the  theory  of  the  Treasury,  that  all  evils  would 

a  Finance,  4:451.  b  Catterall,  25-26. 


7069 — 10 - 11 


161 


National  Monetary  Commission 


V 


be  cured  if  resumption  were  once  obtained.  There  was, 
however,  a  wide  difference  between  nominal  and  real 
resumption,  between  temporary  and  permanent  resump¬ 
tion.  Real  and  permanent  resumption  could  only  be 
secured  by  contraction  of  loans  and  a  reduction  of  bank¬ 
note  circulation.  The  bank,  on  the  contrary,  accepted 
the  extraordinary  commercial  expansion  which  occurred 
after  the  establishment  of  peace  as  a  normal  and  healthy 
condition.  It  loaned  freely,  particularly  in  Philadelphia 
and  Baltimore,  and  it  allowed  the  branches,  especially  in 
the  South  and  West  to  extend  discounts  beyond  the  mar¬ 
gin  of  safety. a  Moreover,  it  displayed  favoritism  in  loans 
to  its  own  stockholders  and  promoted  the  operations  of 
speculators  at  its  Baltimore  branch. 

The  weakness  of  state  banks  and  their  ineffectiveness 
in  accomplishing  the  task  of  resumption  is  well  illustrated 
by  the  experience  of  the  Maryland  banks,  as  described 
by  Bryan.  Most  of  the  country  banks  in  that  State  had 
been  chartered  after  1812;  their  deposits  were  smaller 
than  those  of  the  city  banks,  and  they  had  to  depend 
more  upon  circulation;6  their  resources  were  locked  up 
in  real  estate,  and  although  they  resumed  temporarily 
in  February,  1817,  they  could  not  stand  the  strain.0 
Throughout  1817-1820  their  notes  were  below  par,  rang¬ 
ing  in  depreciation  from  10  to  90  per  cent,  and  brokers 
even  refused  to  buy  them.  Thirteen  of  these  banks 
in  1820  were  obliged  to  wind  up  their  affairs.  During 

aCatterall,  33-34. 

b  A.  C.  Bryan,  History  of  State  Banking  in  Maryland,  52. 

c  Ibid.,  57. 


162 


I 


The  S  e  con  d  u  nit  ed  States  Bank 


the  inflation  period  of  1816-17  loans  were  made  to  farm¬ 
ers,  and  prices  of  agricultural  products  fell  so  that  the 
farmers  were  unable  to  pay  at  maturity.  In  1818  one  of 
these  country  banks  had  one  hundred  and  fifty  suits  at 
law  against  individuals  for  debt."  The  Baltimore  banks 
suffered  heavy  losses  due  to  maladministration,  bad  prac¬ 
tice,  and  bad  investments;  renewals  of  notes  were  unwisely 
made  and  investments  in  internal  improvements  were  not 
profitable. 6  Loans  were  made  too  freely  to  officers  of  the 
banks,  whose  administration  was  largely  in  the  hands  of 
cashiers. c  It  was  common  for  paper  td  run  four  or  five  years 
without  change  in  the  indorsement.  Indorsers,  therefore, 
who  were  sound  in  1814,  were  found  to  be  without  property 
in  1818.  As  the  depreciation  of  bank  notes  varied,  banks 
sought  to  buy  in  their  notes  at  the  lowest  possible  rates, 
and  oftentimes  special  arrangements  were  entered  into 
with  note  brokers.  Demand  for  specie  was  in  many 
cases  the  cause  of  unpleasant  relations. d  Under  such  con¬ 
ditions  the  responsibility  which  was  imposed  upon  the 
United  States  Bank  in  leading  the  way  to  resumption 
proved  obnoxious  to  local  banks. 


COMPARISON  OP  CHARTERS  OF  THE  FIRST  AND  SECOND 

UNITED  STATES  BANKS. 


For  purposes  of  comparison,  the  following  summary  is 
given,  showing  by  points  the  principal  provisions  of  the 

charters  of  the  First  and  Second  United  States  banks.  A 

/ 

stands  for  the  First  and  B  for  the  Second  Bank.  When 

«  A.  C.  Bryan,  History  of  State  Banking  in  Maryland,  66. 
b  Ibid.,  60.  c  Ibid.,  67.  d  Ibid. ,69. 


163 


N  at  i on  a l  M  on  et  a  r  y  Commission 

no  entry  is  made  after  the  letter  the  charter  is  silent.  It 
will  be  observed  that  many  of  the  provisions  are  practi¬ 
cally  identical. 

1.  Size  of  capital: 

A.  $10,000,000. 

B.  $35,000,000. 

2.  Par  value  of  shares: 

A.  $400. 

B.  $100. 

3.  Management  of  subscriptions: 

A.  Under  superintendence  of  at  least  three  per¬ 

sons  appointed  by  the  President;  sub¬ 
scriptions  to  be  opened  at  Philadelphia 
and  continued  until  all  the  stock  has  been 
subscribed. 

B.  Under  superintendence  of  five  commission¬ 

ers  at  Philadelphia,  and  of  three  other 
commissioners  each  at  Portland,  Me., 
Portsmouth,  N.  H.,  etc.  (eighteen  other 
places),  appointed  by  the  President. 

4.  State  ownership  or  subscriptions  by  the  Government : 

A.  $2,000,000. 

B.  $7,000,000. 

5.  Limitations  in  the  number  of  shares  to  be  subscribed 
by  any  one  person: 

A.  Not  exceeding  1,000  shares,  or  $400,000. 

B.  Not  exceeding  3,000  shares,  or  $300,000. 

6.  Private  subscriptions  to  be  paid: 

A.  One-fourth  in  gold  and  silver,  three-fourths 
in  the  public  debt. 


164 


The  Second  United  States  Bank 


6.  Private  subscriptions  to  be  paid — Continued. 

B.  One-fourth  in  gold  or  silver  coin  of  the 
United  States,  or  in  gold  coin  of  Spain,  or 
in  other  foreign  gold  or  silver  coin  at  pre¬ 
scribed  rates,  and  three-fourths  in  the 
funded  debt  of  the  United  States. 

7.  Length  of  time  for  payment: 

A.  Four  installments,  six  months  apart,  the  first 

to  be  paid  at  time  of  subscription. 

B.  Three  installments:  At  subscription,  $5  in 

specie  and  $25  in  specie  or  government 
stock;  in  six  months,  $10  in  specie  and  $25 
in  specie  or  government  stock;  in  twelve 
months,  $10  in  specie  and  $25  in  specie  or 
government  stock. 

8.  Maximum  amount  of  property  to  be  held: 

A.  $15,000,000,  including  capital  stock. 

B.  $55,000,000,  including  capital  stock. 

9.  Length  of  charter: 

A.  Twenty  years. 

B.  Ibid. 

10.  Limitations  in  ownership  of  real  estate: 

A.  Land,  tenements,  and  hereditaments  “only 

such  as  shall  be  requisite  for  its  immediate 
accommodation  in  relation  to  the  conveni¬ 
ent  transacting  of  its  business  and  such  as 
shall  have  been  bona  fide  mortgaged  to  it 
by  way  of  security,  or  conveyed  to  it  in 
satisfaction  of  debts  previously  contracted 
in  the  course  of  its  dealings,  or  purchased 
at  sales  upon  judgment.” 

B.  Ibid. 

165 


N  at  ion  a  l  M  o  n  et  a  r  y  Commission 


n.  Beginning  of  business: 

A.  As  soon  as  $400,000  is  received  in  specie, 

notice  to  be  given  in  Philadelphia  for  elec¬ 
tion  of  directors,  who  shall  forthwith  com¬ 
mence  operations.  (Sec.  5.) 

B.  As  soon  as  $8,400,000  in  specie  and  in  public 

debt  has  been  received,  directors  to  be 
elected.  (Sec.  9.) 

12.  Indebtedness: 

A.  $10,000,000  over  and  above  deposits  “whether 

by  bond,  bill,  note,  or  other  contract,” 
unless  authorized  by  law  of  the  United 
States. 

B.  $35,000,000  over  and  above  deposits  “whether 

by  bond,  bill,  note,  or  other  contract,” 
unless  authorized  by  law. 

13.  Scope  of  business: 

A.  Shall  not  “directly  or  indirectly  deal  or  trade 

in  anything  except  bills  of  exchange,  gold 
or  silver  bullion,  or  in  the  sale  of  goods 
really  and  truly  pledged  for  money  lent 
and  not  redeemed  in  due  time,  or  of  goods 
which  shall  be  the  produce  of  its  lands.” 

B.  Ibid. 

14.  Limitations  in  powers: 

A.  Could  not  purchase  any  public  debt  whatso¬ 

ever. 

B.  Ibid. 

15.  Restrictions  on  sale  of  its  government  stock: 

A.  Could  sell  any  part  of  the  public  debt  whereof 
its  stock  was  composed. 

166 


The  Second  United  States  B an  k 


15.  Restrictions  on  sale  of  its  government  stock — Cont’d. 

B.  Could  sell  for  coin  or  bullion,  its  government 
stock,  limited,  however,  as  follows: 

(1)  To  $2,000,000  in  any  one  year. 

(2)  Could  not  sell  within  the  United  States 

without  giving  notice  to  the  Secre¬ 
tary  of  the  Treasury  and  offering  the 
same  to  the  United  States^' at  the 
current  price,  not  exceeding  the 
rates  aforesaid,”  that  is,  the  rates 
at  which  the  stock  was  subscribed. 
(Sec.  3.) 

16.  Rate  of  interest: 

A.  Could  not  charge  more  than  6  per  cent  per 

annum  upon  its  loans  or  discounts. 

B.  Ibid. 

17.  Loans  to  Government: 

A.  No  loan  to  the  United  States  exceeding 

$100,000,  or  to  any  particular  State  over 
$50,000,  or  to  any  foreign  prince  or  State, 
unless  authorized  by  law. 

B.  To  the  United  States,  not  over  $500,000,  or  to 

a  particular  State,  $50,000,  or  to  a  foreign 
prince  or  State,  unless  authorized  by  law. 

18.  Number  of  directors: 

A.  Twenty-five. 

B.  Ibid. 

19.  Government  directors: 

B.  Five  to  be  appointed  by  the  President  of  the 
United  States,  by  and  with  the  advice  and 
consent  of  the  Senate,  and  not  more  than 
three  to  be  resident  in  any  one  State. 


167 


N  at  i  o  n  a  l  M  on  et  ary  Commission 


20.  Election  of  directors: 

A.  Annual,  by  stockholders,  by  plurality  of  votes 

actually  given. 

B.  Twenty  to  be  elected  annually  by  stock¬ 

holders  other  than  the  United  States. 

21.  Qualifications  of  directors: 

A.  Must  be  stockholders  and  citizens  of  the 

United  States;  not  more  than  three-fourths 
of  the  directors,  exclusive  of  the  president, 
shall  be  eligible  for  the  next  succeeding 
year;  the  director  who  shall  be  president 
may  always  be  reelected. 

B.  Must  be  stockholders  and  resident  citizens  of 

the  United  States;  not  more  than  three- 
fourths  of  the  directors  elected  by  stock¬ 
holders,  and  four-fifths  of  the  directors 
appointed  by  the  president  shall  be  elected 
or  appointed  for  the  next  succeeding  year. 
No  director  to  hold  his  office  more  than 
three  years  out  of  four  in  succession,  but 
the  director  who  shall  be  president  may  be 
reelected. 

22.  Duties  of  directors: 

A.  Have  power  to  appoint  officers,  clerks,  etc., 

and  to  allow  them  compensation  and  to 
exercise  their  powers  for  government  as 
fixed  by  by-laws. 

B.  Ibid. 


168 


The  S  econ  d  u  nit  e  d  St  ates  Bank 


23.  Compensation  to  directors: 

A.  No  director  to  be  entitled  to  any  emolument 

unless  the  same>  shall  have  been  allowed  by 
stockholders  at  a  general  meeting. 

B.  A  director  other  than  the  president  shall  not 

be  entitled  to  any  emolument.  (The  clause 
permitting  the  stockholders  at  a  general 
meeting  to  allow  compensation  is  omitted 
in  the  charter  of  the  Second  Bank.) 

24.  Quorum  for  business  by  directors: 

A.  Not  less  than  seven. 

B.  Ibid. 

25.  Compensation  to  the  president: 

A.  Stockholders  may  make  compensation  to  the 
president  for  his  “extraordinary  attend¬ 
ance”  at  the  bank,  as  shall  appear  to  them 
reasonable. 

B.  Ibid. 

26.  Liability  of  directors: 

A.  In  case  of  excess  of  indebtedness,  directors 

under  whose  administration  it  shall  happen 
shall  be  liable  in  their  natural  and  private 
capacity,  and  an  action  of  debt  may  be 
brought  against  them  in  any  court  of  record 
in  the  United  States.  A  director  who  may 
have  been  absent  when  the  excess  was  con¬ 
tracted  for,  or  who  may  have  dissented, 
may  exonerate  himself  by  giving  notice  to 
the  President  of  the  United  States  and  to 
the  stockholders  at  a  general  meeting. 

B.  Ibid. 


169 


N  at i o n a  l  M  o  n  et  a  r  y  Commission 


•  *  i 

27.  Voting  by  stockholders: 

A.  For  1  share  and  not  more  than  2  shares,  1  vote. 
For  every  2  shares  above  2,  not  exceeding  10. 

1  vote. 

For  every  4  shares  above  10,  not  exceeding  30, 
1  vote. 

For  every  6  shares  above  30,  not  exceeding  60, 
1  vote. 

For  every  8  shares  above  60,  not  exceeding 
100,  1  vote. 

For  every  10  shares  above  100,  1  vote. 

No  person  to  have  more  than  30  votes. 

B.  'Ibid. 

28.  Conditions  in  ownership  of  stock  to  qualify  voter: 

A.  Stock  must  be  held  for  three  months  previous 

to  election. 

B.  Ibid. 

29.  Residence  of  voters: 

A.  Stockholders  actually  resident  within  the 

United  States  to  vote  by  proxy. 

B.  Ibid. 

30.  Calling  of  meetings: 

A.  Not  less  than  60  stockholders  who  own  200 

shares,  or  $80,000,  of  stock  could  call  a 
meeting,  giving  ten  weeks’  notice. 

B.  Not  less  than  60  stockholders  holding  1,000 

shares,  or  $100,000,  of  stock  could  call  a 
meeting,  giving  ten  weeks’  notice. 

3 1 .  Bills  of  credit  under  seal  assignable  by  indorsement : 

B.  No  bill,  obligatory  or  of  credit  or  of  other 
obligation  under  its  seal,  to  be  made  for  the 
payment  of  a  sum  less  than  $5,000. 

170 


The  Second  United  States  Bank 


32.  Bills  not  under  seal: 

A.  Binding  upon  the  bank,  etc. 

B.  Provided  that  notes  not  payable  on  demand 

might  be  made  for  sums  not  less  than  $100 
and  payable  to  the  order  of  some  person  or 
persons  not  exceeding  sixty  days.  (Secs. 
11  and  12.) 

33.  Denominations  of  notes: 

B.  No  note  for  less  than  $5. 

34.  Non-redemption  of  bills: 

B.  If  the  bank  suspended  or  refused  payment  in 
specie,  holder  to  be  entitled  to  12  per  cent 
interest  until  demand  is  satisfied. 

35.  Branches: 

A.  Lawful  for  the  directors  to  establish  offices 

where  they  shall  think  fit,  within  the 
•  United  States,  for  the  purposes  of  discount 

and  deposit  only. 

B.  Shall  establish  an  office  of  discount  in  the 

District  of  Columbia  whenever  Congress 
shall  require;  also  an  office  of  discount  and 
deposit  in  any  State  in  which  2,000  shares 
shall  have  been  subscribed  or  may  be  held, 
upon  application  of  legislature  of  such 
State,  or  of  Congress;  also  bank  could 
establish  offices  of  discount  and  deposit 
wherever  they  thought  fit,  or  they  could 
employ  any  other  bank  approved  by  the 
Secretary  of  the  Treasury  to  transact  its 
business  other  than  for  the  purpose  of  dis¬ 
count. 

171 


N  at i o n a l  M  on  et  a  r  y  Commission 


36.  Management  of  branches : 

A.  “  Upon  same  terms  and  in  the  same  manner  as 

shall  be  practiced  at  the  bank.” 

B.  Not  more  than  thirteen  nor  less  than  seven 

managers  or  directors  of  each  branch  to  be 
annually  appointed  by  the  bank,  to  serve 
one  year.  These  shall  choose  a  president 
from  their  own  number.  Directors  must 
be  citizens  of  the  United  States  and  resident 
of  the  State.  Not  more  than  three-fourths 
can  be  reappointed  for  the  next  succeeding 
year,  and  no  director  to  hold  his  office  more 
than  three  years  out  of  four,  but  the  presi¬ 
dent  could  be  reappointed. 

37.  Supervision  by  the  Government: 

A.  Treasury  Department  to  be  furnished,  as 

often  as  required,  not  exceeding  once  a 
week,  with  statements  of  the  amount  of 
capital,  debts,  deposits,  notes  in  circulation, 
cash  on  hand,  and  to  have  the  right  to  in¬ 
spect  the  general  accounts;  not,  however, 
the  account  of  any  private  individual. 

B.  Ibid. 

38.  Right  of  Congress  to  investigate: 

B.  Committee  of  either  House  of  Congress, 
appointed  for  that  purpose,  to  have  the 
right  to  inspect  books  and  to  examine  pro¬ 
ceedings  of  the  bank  and  report  whether 
charter  has  been  violated.  (Sec.  23.) 


1 


172 


The  S  e  con  d  u  nited  St  ate  s  Bank 


39.  Action  in  case  of  violation  of  charter: 

B.  Whenever  a  violation  of  charter  was  reported, 
or  the  president  had  reason  to  believe  that 
the  charter  had  been  violated,  it  should  be 
lawful  for  Congress  to  direct,  or  the  Presi¬ 
dent  to  order,  a  scire  facias  out  of  the  Dis¬ 
trict  of  Columbia,  calling  on  the  corpora¬ 
tion  to  show  wherefore  the  charter  should 
not  be  declared  forfeited. 

40.  Dividends: 

A.  Semi-annual  dividends  to  be  made  as  appear 

to  the  directors  advisable. 

B.  Ibid. 

41.  Unpaid  debts: 

A.  The  bank  once  in  three  years  to  lay  before 

the  stockholders  an  exact  and  particular 
statement  of  debts  which  have  remained 
unpaid  for  the  period  of  treble  the  term  of 
credit.  If  any  subscriber  shall  be  in 
arrears,  he  shall  lose  the  benefit  of  the 
dividend. 

B.  Ibid. 

42.  Penalties  for  engaging  in  business  contrary  to  the 

charter: 

A.  Every  person  concerned  to  forfeit  and  lose 

treble  the  value  of  goods,  wares,  mer¬ 
chandise,  commodities  in  which  the  deal 
and  trade  shall  have  been.  One-half  to 
go  to  the  use  of  the  informer  and  the  other 
half  to  the  United  States. 

B.  Ibid. 


173 


National  Monetary  Commission 


43.  Penalty  for  loaning  money  to  the  Government  in 
excess  of  that  permitted  by  charter: 

A.  Every  person  concerned  in  making  such  ad¬ 

vance  to  forfeit  treble  the  value.  One-fifth 
to  go  to  the  informer  and  four-fifths  to  the 
United  States. 

B.  Ibid. 

44.  Tender  of  notes  to  the  United  States: 

A.  Notes  payable  on  demand  in  gold  or  silver 

coin  to  be  receivable  in  all  payments  to 
the  United  States. 

B.  Ibid.,  with  the  addition  “unless  otherwise 

directed  by  act  of  Congress.” 

45.  Transfer  of  public  funds: 

B.  Bank  to  transfer  public  funds  within  the 
United  States  and  to  distribute  the  same 
in  payment  of  public  debtors  without 
charging  commission  or  claiming  allowance 
on  account  of  difference  of  exchange. 
(Sec.  15.) 

46.  To  act  as  commissioner  of  loans: 

B.  Bank  to  perform  the  duties  of  commissioner 
of  loans  for  the  several  States  whenever 
required  by  law.  (Sec.  15.) 

,y/  47.  Bonus: 

B.  Bank  to  pay  $1,500,000. 

48.  Deposits  of  the  United  States: 

B.  Bank  to  receive  the  deposits  of  the  United 
States  “unless  the  Secretary  of  the  Treas¬ 
ury  shall  at  any  time  otherwise  order  and 


174 


The  Second  United  States  Bank 


48.  Deposits  of  the  United  States — Continued. 

direct;  in  which  case  the  Secretary  of  the 
Treasury  shall  immediately  lay  before 
Congress,  if  in  session,  and  if  not,  imme¬ 
diately  after  the  commencement  of  the 
next  session,  the  reasons  of  such  order  or 
direction.”  (Sec.  16.) 

49.  Monopoly  of  franchise: 

A.  No  other  bank  to  be  established  by  the 

United  States  during  the  continuance  of 
the  bank. 

B.  Ibid. 

50.  Bonds  of  cashier: 

A.  Cashier  to  give  bond  with  two  or  more 

sureties,  not  less  than  $50,000. 

B.  Ibid. 

51.  Counterfeiting: 

B.  Penalties.  (Secs.  18,  19.) 

52.  Object: 

A.  To  be  conducive  to  the  successful  conducting 
of  the  national  finances ;  tend  to  give 
facility  to  the  obtaining  of  loans  for  the 
use  of  the  Government  in  sudden  emer¬ 
gencies;  and  to  be  productive  of  consider¬ 
able  advantage  to  trade  and  industry  in 
general.  (Preamble.) 

PAYMENT  OF  CAPITAL. 

The  charter  called  for  the  payment  of  (1)  $7,000,000 
by  the  Government  and  (2)  $28,000,000  by  individuals, 
companies,  or  corporations. 


175 


National  Monetary  Commission 


Payment  by  the  Government  was  to  be  made  in  stock; 
and  by  private  subscribers  one-fourth,  or  $7,000,000,  in 
specie;  and  three-fourths,  or  $21,000,000,  in  government 
stock  or  specie. 

The  settlement  of  private  subscriptions  could  be  made 
in  three  installments,  six  months  apart,  the  first  being 
made  at  the  time  of  subscription.  The  final  payment 
was  thus  not  called  for  until  a  year  from  the  time  the 
first  steps  were  taken.  Installments  were  to  be  paid  as 
follows:  First,  at  subscription,  $5  in  specie  and  $25  in 
government  stock  or  specie;  second,  in  six  months,  $10  in 
specie  and  $25  in  government  stock  or  specie;  third,  in 
twelve  months,  $10  in  specie  and  $25  in  government 
stock  or  specie. 

According  to  the  charter  (sec.  9)  directors  could  be 
elected  as  soon  as  $8,400,000  in  specie  and  in  the  public 
debt  had  been  received.  This  obviously  authorized  the 
bank  to  begin  operations  when  the  first  installment  of 
$1,400,000  in  specie  and  $7,000,000  in  stock  had  been 
paid  in.  Subscriptions  were  made  in  July,  1816,  and  the 
bank  authorized  discounts  to  be  made  beginning  Decem¬ 
ber  31. 

The  bank  was  in  a  difficult  position,  for  specie  at  this 
time  was  at  a  premium.  In  December,  1816,  the  pre¬ 
mium  amounted  to  8  per  cent.  If  there  had  been  any 
unusual  demand,  it  would  have  risen  to  at  least  12  per 
cent.a  Individuals  naturally  would  not  deposit  specie, 
and  the  government  receipts,  which  were  deposited  with 
the  bank,  were  still  in  depreciated  paper.  The  only  penalty 

a  Lloyd  to  Calhoun,  Finance,  3:  153. 


176 


The  Second  United  States  Bank 


attached  to  stockholders’  failure  to  pay  any  installment 
as  it  became  due  was  forfeiture  of  the  dividend,®  a  loss 
which  would  be  trifling  in  comparison  with  the  pay¬ 
ment  of  a  premium  on  specie  in  the  bullion  market.  In 
December  there  were  rumors  that  the  management  of 
the  bank  had  countenanced  arrangements  by  which  the 
specie  part  of  the  second  installment  would  be  evaded  or 
postponed.  The  bank  was  expected  to  begin  operations 
before  the  resumption  of  specie  payments,  February  20, 
1817.  If,  however,  it  should  put  its  notes  into  circulation, 
they  would  be  presented  for  redemption  in  specie,  and 
thus  its  resources  would  be  drained.  Consequently,  in 
December,  when  it  voted  to  begin  discounting  sixty-day 
bills  on  the  pledge  of  bank  stock  or  United  States  stock, 
it  demanded  that  notes  should  be  made  payable  at  ma¬ 
turity,  either  in  specie  or  bills  of  the  bank. 

The  bank,  however,  could  not  force  the  stockholders  to 
pay  specie  on  the  several  installments  if  they  preferred  to 
accept  the  penalty  of  forfeiting  their  dividends,  and 
many  stockholders  were  willing  to  take  this  alternative. 
As  one  of  the  directors  of  the  bank  observed,  “any  very 
strong  reliance  upon  the  constructive  policy  of  moneyed 
men  in  opposition  to  their  pecuniary  interest  and  in  the 
absence  of  any  special  agreement  on  their  part  would 
form  a  most  fragile  dependence  for  a  great  banking  insti¬ 
tution  to  bottom  its  operations  upon.’’* 6  The  president 
of  the  bank  also,  on  January  1,  1817,  stated  that  the 
punctual  payment  of  the  second  installment  was  yet  prob- 


aSec.  11,  clause  13. 

&  James  Lloyd  to  Calhoun,  Jan.  9,  1817;  Finance,  3:  153. 


7069 — 10 - 12 


177 


National  Monetary  Commission 


lematical,  for  the  act  of  incorporation  did  not  provide 
the  necessary  means  to  insure  punctuality.  Moreover, 
“the  premium  demanded  for  the  specie  and  the  interest 
on  the  amount  of  the  installments  furnished  stronger 
motives  to  delinquency  than  any  hope  of  dividends  from 
the  bank  during  the  first  year  does  to  observe  punctu¬ 
ality.’’® 

Notwithstanding  this  apparent  recognition  of  insecur¬ 
ity,  the  bank  appears  to  have  exerted  no  special  pressure 
to  force  stockholders  to  pay  specie.  Indeed,  it  appears 
to  have  been  more  solicitous  to  provide  shareholders  with 
easy  methods  for  paying  for  their  stock  rather  than  to 
establish  a  solid  institution  founded  on  specie  which 
could  withstand  the  attacks  of  fluctuating  credit.  Al¬ 
though  the  charter  demanded  payment  in  specie,  there 
was  no  provision  against  the  withdrawal  of  the  specie, 
nor  could  there  be  as  long  as  the  bank  redeemed  its  own 
notes.  If  the  bank  issued  its  bills,  they  could  be  pre¬ 
sented  for  redemption  in  specie.  That  was  practically 
the  method  followed  in  the  organization  of  the  state 
banks,  where  specie  installments  were  nominally  required, 
and  its  possible  adoption  in  the  present  case  was  recog¬ 
nized  in  the  congressional  debates  at  the  time  of  the 
charter.*  6  , 

The  management  of  this  new  bank,  to  which  had  be* 
committed  the  task  of  restoring  the  currency,  weakly 
cepted  the  tolerant  practice  which  was  then  in  use;  a 

°  Jones  to  Crawford,  Jan.  i,  1817;  Finance,  4:  764. 

&  Speech  of  Mason,  Annals  of  Congress,  14th  Cong.,  1  sess.,  I:  236;  Cal¬ 
houn,  Jan.  7,  1817,  Annals  of  Congress,  14th  Cong.,  2  sess.,  431;  Annals 
of  Congress,  15th  Cong.,  2  sess.,  Ill;  Lowndes,  306-307,  McLean,  1340- 
1343,  Sergeant,  1389-1391;  Catterall,  59. 


178 


% 


The  S  econd  u  nit  ed  States  Bank 

on  December  18,  before  discounts  of  any  character  had 
been  made,  voted  that  on  the  31st  it  would  discount 
notes  secured  by  a  deposit  of  an  equal  amount  of  bank 
stock,  and  also  authorized  the  branches  at  Boston,  New 
York,  and  Baltimore  to  make  similar  loans,  not  exceeding, 
however,  one-tenth  of  the  amount  of  subscription  of  the 
capital  of  the  bank  at  the  respective  places. a  On  Decem¬ 
ber  27  it  was  further  voted  that  the  loans  should  be  made 
for  the  accommodation  of  stockholders  exclusively,  and 
“  to  the  amount  of  their  respective  proportion  of  the  pay¬ 
ments  in  coin  on  account  of  the  second  installment  of 
the  capital  of  the  bank.”6  It  would  have  been  safer  if  the 
management  had  ordered  the  acceptance  of  state  bank 
notes,  for  this  would  have  enabled  the  bank  to  gain  posses¬ 
sion  of  local  currency,  and  thus  given  it  a  lever  to  use  in 
restoration  of  the  currency.  After  resumption  was  accom¬ 
plished  the  president  of  the  bank  in  May,  1817,  notified 
the  several  branches  that  for  the  third  installment  it  was 
“not  intended  to  exact  from  the  subscribers  the  actual 
payment  of  the  specie  proportion  in  coin.”0  Later  it 
was  frankly  admitted  that  “the  notes  of  and  checks  on 
the  Bank  of  the  United  States  and  the  notes  of  banks 
actually  paying  specie  were  indiscriminately  received  with 
the  gold  and  silver  in  payment  of  the  cash  part  of  this 
installment.”  d 

Subscribers  were  also  dilatory  in  meeting  their  pay¬ 
ments.  The  first  installment  was  promptly  met,  but  on 

°  Finance,  3:335. 
b  Ibid.,  3:336. 
clbid.,  3:341- 

d  Jones  to  Crawford,  Nov.  11,  1818;  Ibid.,  3:288. 


179 


N  at  i  on  a  l  Monetary  Commission 


the  second  only  $2,251,000  of  the  so-called  “specie,”  ac¬ 
cording  to  the  liberal  interpretation  accepted  by  officers 
of  the  bank,  out  of  $2,800,000  real  specie  demanded  by 
the  charter  was  turned  in  when  due;  and  in  stock  only 
$5,3 79, ooo  out  of  $7,000,000.  As  the  method  of  evasion 
became  better  understood,  the  “specie”  paid  in  at  the 
third  installment  was  over  the  required  amount,  nearly 
meeting  the  deficiency  of  the  second  installment. a 

Another  consequence  of  the  subterfuge  permitted  by 
the  board  of  management  was  that  a  smaller  proportion 
of  the  capital  than  that  contemplated  by  the  charter 
was  represented  by  government  stock.  The  charter  per¬ 
mitted  $21,000,000  of  the  capital  subscribed  by  private 
individuals  to  be  contributed  in  stock  or  specie.  It  was 
not,  however,  expected  that  the  latter  provision  would 
be  taken  advantage  of;  but  if  so  elected,  the  payment 
would  naturally  be  made  in  coin.  As  notes  of  the  bank 

and  other  specie-paying  banks  were  accepted,  and  the  bank 

% 

made  loans  to  stockholders  on  their  stock,  subscribers 
found  it  more  profitable  to  make  their  payments  in 
what  was  accepted  as  “specie,”  rather  than  in  securities. 
The  result  was  that  only  $15,430,000  of  government 
stock,  instead  of  $21,000,000,  was  turned  in  by  private 
subscription.  The  capital  was  thus  weakened,  for  United 
States  stock  was  appreciating  in  value  and  was  a  safer 
investment  than  the  stock  notes  of  speculative  share¬ 
holders.  b 

a Finance,  4:964.  & Ibid.,  3:  291. 


180 


The  Second  U  nit  ed  St  at  es  Bank 


FRICTION  IN  TRANSFER  OF  PUBLIC  DEPOSITS. 

Aside  from  the  bank’s  own  errors  of  management  and 
policy,  there  were  two  points  of  friction  with  the  state 
banks:  first,  in  the  transfer  of  public  deposits ;  and,  second, 
in  the  credit  to  be  given-to.-the  notes  of  state  banks.  On 
each  of  these  points  the  Treasury  was  disposed  to  act 
leniently.  Dallas,  in  July,  1816,  gave  notice  that  the 
transfer  of  the  public  funds  from  the  state  institutions  to 
the  national  bank  and  its^branches  would  be  gradual,  and 
that  the  notes  of  the  state  banks  would  be  freely  circulated 
by  the  Treasury  and  the  bank"  This  anticipation  was 
renewed  by  Crawford,  in  his  circular  letter  of  December  20, 
1816  6  when  the  depository  banks  were  informed  that  if 
resumption  were  accomplished  on  February  20,  between 
that  date  and  July  1  only  such  withdrawals  would  be  made 
as  were  necessary,  and  that  even  after  the  latter  date  funds 
would  not  be  transferred  except  to  sustain  the  bank  against 
pressure.  The  proposition  for  resumption,  however,  was 
declined  by  the  banks  in  general,  and  its  accomplishment, 
as  has  been  stated,  was  effected  only  by  a  special  agreement 
between  the  bank  and  the  local  banks  in  New  York,  Phila¬ 
delphia,  and  Baltimore.  The  bank,  therefore,  was  under  no 
obligations  to  banks  in  general  to  adopt  the  forbearing 
measures  previously  proposed .  As  the  country  banks ,  how¬ 
ever,  were  not  invited  to  be  parties  to  the  agreement  which 
was  made  with  the  eastern  city  banks,  they  afterwards 
claimed,  when  the  bank  demanded  a  more  summary  trans¬ 
fer,  that  they  were  being  treated  with  harshness,  if  not 
with  insincerity. c 

“Finance,  4: 1023.  &  Ibid.,  4;  266,  283.  clbid.,  4:787-788. 

181 


N  at  ion  a  l  M  on  et  a  r  y  Commission 


On  March  15,  1817,  a  convention  of  banks  in  the  western 
part  of  Pennsylvania,  Virginia,  and  the  eastern  districts  of 
Ohio  notified  the  bank  that  it  was  only  equitable  that 
they,  as  well  as  the  eastern  banks,  should  be  aided  in 
resumption  before  they  opened  their  vaults  for  the  with¬ 
drawal  of  specie.  As  western  merchants  were  largely 
indebted  to  the  East  there  was  danger  of  a  drain  of  specie 
to  meet  the  demands  for  their  notes  which  were  held  as  a 
special  deposit  for  the  United  States  in  the  branch  office  at 
Pittsburg.  They  asked,  therefore,  that  the  banks  be 
given  until  August  1  before  the  balance  was  withdrawn, 
and  then  only  “in  a  manner  as  favorable  to  the  bank 
as  circumstances  will  warrant.” a  These  local  banks 
even  objected  to  the  use  of  the  branch  offices  in 
that  section;  they  notified  Crawford  that  it  was  a  seri¬ 
ous  disadvantage  to  place  these  western  institutions  in  the 
hands  of  a  corporation  the  directors  of  which  were  not 
identified  in  feeling  or  interest  with  the  western  banks  or 
country;  it  would  be  more  advantageous  to  place  the 
deposits  in  banks  nearer  to  the  land  offices,  thus  creat¬ 
ing  a  community  of  interest  and  avoiding  a  drain  of 
specie.* 6  Crawford  was  disposed  to  regard  such  sugges¬ 
tions  in  a  friendly  spirit,  for  the  Treasury  could  not 
afford  to  have  the  credit  of  these  local  institutions  suffer. c 
He  also  wrote  Jones  that  the  Treasury  was  under  no 
obligation  to  order  transfers  in  places  where  there  were 
no  branches  of  the  bank;  and  if  special  terms  were 
offered  to  these  institutions  the  banks  in  the  East  would 

0  Finance,  4:  788. 

&  Ibid.,  4:  994. 

c  March  17,  1817;  Ibid.,  4:  509. 


182 


Th  e  Secon  d  U  nit  ed  States  Bank 


have  no  cause  for  complaint.  He  therefore  suggested  that 
the  country  banks  should  not  be  required  to  pay  interest 
on  delayed  transfers  before  April  i,  and  that  in  Ken¬ 
tucky  and  Ohio  interest  should  not  be  demanded  until 
branches  were  established  in  those  States.  Crawford  also 
refused  to  withdraw  the  treasury  funds  from  its  local 
depository  in  Rhode  Island  until  the  bank  had  established 
an  agency  there,  on  the  ground  that  it  would  have  been 
impossible  for  merchants  in  that  State  to  obtain  means  to 
pay  their  bonds  when  due,  and  this  would  have  delayed 
the  payment  of  the  revenue. 

The  bank,  however,  treated  the  requests  of  the  western 
banks  in  a  summary  manner.  It  demanded  that,  on  con¬ 
dition  of  assuming  at  once  the  debt  to  the  Government  by 
the  banks,  the  latter  should  pay  over  the  whole  amount 
on  August  i ,  with  interest  from  April  i ,  and  that  the  banks 

should  jointly  and  severally  guarantee  this  payments 
This  reply  so  angered  the  western  institutions  that  they 

curtly  informed  the  bank  that  they  saw  no  advantage 
which  could  result  from  accepting  such  a  proposition, 
and  that  the  requirement  of  a  guarantee  was  of  such  a 
character  that  self-respect  compelled  them  to  decline  any 
further  correspondence  on  the  subject.* 6  The  bank,  after 
advising  with  Crawford,  who  again  counseled  leniency,0 
negotiated  with  each  bank  separately  through  a  “con¬ 
ciliatory”  agent.  It  expressed  its  willingness  to  defer 
the  demand  for  interest  on  balances,  but  it  refused  to 
credit  the  Treasury  with  cash  until  interest  did  begin. d 

o  Finance,  4:  739,  April  3,  1817.  c  Ibid.,  4:  524,  787. 

&  Ibid.,  4:  788.  d  Ibid.,  4:  791. 


183 


N  at  ion  a  l  M  o  n  et  a  r  y  Commission 


An  illustration  of  the  difficulties,  which  is  typical  of 
many  others,  is  disclosed  in  the  correspondence  between 
the  bank  and  the  Cincinnati  banks  in  August,  1818. 
The  bank,  hampered  by  a  long  delay  in  settling  the  bal¬ 
ances,  which  amounted  to  $721,000,  notified  the  three 
local  banks  that  they  must  reduce  their  debt  by  the  pay¬ 
ment  of  20  per  cent  during  each  of  the  succeeding  months, 
and  that  6  per  cent  interest  would  be  charged  at  the 
expiration  of  every  thirty  days.  The  banks  viewed  this 
demand  for  so  rapid  a  reduction  with  astonishment  and 
no  small  degree  of  alarm.05  Their  funds  were  loaned 
to  manufacturing  and  commercial  establishments,  to 
public,  literary,  and  charitable  institutions,  on  the  sup¬ 
position  that  they  could  be  redeemed.  Those  expecta¬ 
tions  were  disappointed,  due  in  great  measure  to  the 
establishment  of  the  branches  of  the  bank,  which  with¬ 
drew  the  notes  of  the  local  banks  from  circulation  and 
did  not  issue  their  own  or  a  substitute.  The  banks  did 
not  have  an  adequate  amount  of  specie;  what  they  for¬ 
merly  held  had  been  drawn  upon  to  supply  the  needs  of 
the  newly  established  branches  and  the  new  banks  in 
Kentucky.  Nor  was  it  possible  to  secure  eastern  funds. 
The  banks  also  objected  to  the  payment  of  interest  as 
“an  unprecedented  grievance”  and  a  practice  not  usual 
between  banks.  They  consequently  refused  to  accede 
to  the  terms  of  the  bank,  contenting  themselves  with  a 
proposal  to  reduce  the  debt  as  fast  as  they  could  con¬ 
veniently. 

The  bank  regarded  this  reply  as  “an  appeal  to  popular 
prejudice  and  delinquent  sympathy”  rather  than  “the 


a  Finance,  4:  859. 

184 


The  S  e  con  d  United  St  at  es  Bank 


frank  and  manly  exposition  of  a  candid  debtor.” a 
It  admitted  that  the  charge  of  interest  between  banks 
was  unusual,  but  so  was  it  unusual  for  banks  to  de¬ 
cline  to  redeem  their  notes.  There  was  also  good 
reason  to  believe  that  one  of  the  banks  had  funds  in 
Philadelphia  used  for  the  purpose  of  drawing  specie 
from  the  bank.  The  bank  therefore  notified  the  branch 
at  Cincinnati  to  refuse  the  notes  of  these  banks  and  to 
demand  in  legal  form  the  payment  of  the  debt.  This 
summary  action  precipitated  a  run  on  the  banks,  so  that 
they  suspended  specie  payments,  and  attempts  were 
made  to  excite  public  indignation  against  the  bank. b 

The  Bank  of  Muskingum  complained  that  the  branch 
refused  to  receive  anything  but  specie  or  notes  of  the 
United  States  Bank,  declining  the  notes  of  local  banks 
of  the  town  in  which  the  branch  was  located,  although 
these  bills  were  received  in  ordinary  transactions.  The 
branch  did  not  issue  any  notes  of  its  own,  but  in  mak¬ 
ing  loans  issued  checks  on  the  mother  bank  which  were 
sold  at  a  premium.  c  The  branch  at  Chillicothe  was 
accused  of  declining  to  receive  checks  drawn  on  the 
mother  bank,  although  these  bore  a  premium  of  i  per 
cent,  and  it  was  necessary  to  send  a  messenger  to 
Philadelphia  to  collect  them.  d  The  Bank  of  Steuben¬ 
ville,  Ohio,  declared  that  it  was  impossible  to  pay  the 
third  installment  on  its  balance,  for  it  had  loaned  its 
money  to  relieve  settlers  and  had  given  extensive 

accommodations  to  persons  embarking  in  manufactur- 

c  Ibid.,  4:717. 

d  Ibid.,  4:718-719;  also  737-738. 

185 


“Finance,  4:861. 
b  Ibid.,  4: 864. 


N  at i o n a l  M  on  e  t  a  r  y  Commission 


ing.  To  press  these  for  their  loans  would  mean  ruin.  ° 
In  Charleston,  S.  C.,  the  demand  for  payment  by  the  local 
banks  of  large  sums  which  had  been  left  by  the  branch 
office  on  temporary  deposit,  as  its  own  temporary  vault 
was  inadequate  for  the  safe-keeping  of  specie,  aroused 
“unwarrantable  excitement  and  hostility.”  &  But  one. 
further  illustration  need  be  given:  The  Bank  of  Wash¬ 
ington,  Pa.,  demanded  delay  on  the  ground  that  when 
the  currency  was  depreciated  it  had  received  large 
sums  on  deposit  from  the  Treasury  which  had  been  con¬ 
verted  at  a  loss  into  funds  advantageous  to  the  Gov¬ 
ernment;  it  had  assumed,  however,  that  the  loss  would 
be  made  good.  Instead  of  that,  it  was  now  called  upon 
to  transfer  its  deposits  in  specie.0  Banks,  moreover, 
did  not  hesitate  to  call  upon  the  Treasury  to  support 
their  credit,  even  when  they  had  no  direct  and  specific 
claim  for  consideration.  The  Franklin  Bank  in  Alex¬ 
andria  asked  Crawford  for  a  government  deposit,  as  it 
was  in  danger  of  suspending  specie  payments  and  thus 
subjecting  itself  to  the  penalty  in  the  charter  of  pay¬ 
ing  io  per  cent  interest.  d 

Eastern  as  well  as  western  banks  felt  the  pressure. 
Even  as  strong  an  institution  as  the  State  Bank  in  Boston 
felt  obliged  to  ask  for  indulgence.  It  had  assumed  heavy 
burdens  in  behalf  of  the  Treasury,  and  had  made  large  loans, 
amounting  to  $800,000,  to  merchants  to  enable  them  to 
pay  their  bonds  to  the  Treasury,  on  an  agreement  not  to 
call  for  more  than  10  per  cent  every  sixty  days,  thus 

cMay  25,  1818;  Ibid.,  4:1023. 
dAug.  23,  1819;  Ibid.,  4:1042. 

186 


a  Finance,  4:720. 
6  Ibid.,  3:323. 


The  S  e  con  d  u  nit  ed  St  at  es  Bank 


•  1 

requiring  twenty  months  for  the  liquidation  of  the 
loan. a  It  therefore  requested  that  not  more  than 
$30,000  a  month  of  the  deposits  be  withdrawn.  The 
Bath  Bank  in  Maine  also  reminded  Crawford  that  dur¬ 
ing  the  war  it  had  received  Treasury  notes  at  par  and 
that  for  a  considerable  time  60  per  cent  of  its  capital 
was  so  invested.  For  this  it  hoped  that  the  Govern¬ 
ment  might  be  disposed  to  indemnify  them  for  loss  by 
leaving  portions  of  the  deposits  with  the  bank.* 6  The 
Bank  of  Pennsylvania  called  attention  to  the  services 
which  the  bank  had  previously  rendered  to  the  Treas¬ 
ury,  for  which  it  had  received  the  warm  approbation 

of  Gallatin  and  Dallas.0  For  several  years  the  busi- 

* 

ness  of  the  Government  had  been  a  losing  venture  and 
had  been  continued  only  from  the  hope  of  benefit  after 
the  restoration  of  peace.  It  was  a  hardship,  therefore, 
that  the  deposits  should  be  withdrawn  as  soon  as  the 
bank  began  to  realize  this  hope.  So,  also,  the  Bank  of 
Alexandria,  August  3,  1819/  asked  that  there  might 
be  a  fair  discrimination  between  those  who  had  aided 
the  nation  and  those  who  had  withdrawn  their  co¬ 
operation.  Moreover,  the  deposits  which  the  bank 
had  enjoyed  for  a  long  period  of  years  had  been 
employed  in  nourishing  the  commerce  of  the  town  and 
its  withdrawal  would  contract  business. e  The  real 
difficulty  was  the  inability  of  the  local  banks,  which 
had  been  depositories  of  the  Treasury,  to  meet  their  obli¬ 
gations  to  the  Government.  Some  had  overtraded  in 

a  Jan.  i,  1817;  Finance,  4:974.  cIbid.,  4:1006. 

&  July  16,  1818;  Ibid.,  4: 1026.  d  Ibid.,  4: 1041. 

e  Ibid.,  4: 1038. 

187 


National  Monetary  Commission 


government  funds,  while  others  had  invested  unwisely. 
The  task  of  forcing  a  settlement  was  imposed  upon  the 
bank,  and  this  institution  consequently  incurred  the  dis¬ 
pleasure  and  unpopularity  which  more  justly  should  have 
been  directed  against  the  Treasury  Department. 

The  Second  Bank  was  thus  placed  in  a  much  more  diffi¬ 
cult  position  than  the  First.  The  earlier  bank  had  no  part 
in  the  arrangements  which  the  Government  made  with 
local  institutions,  and  consequently  there  was  little  oppor¬ 
tunity  for  the  collisions  which  its  successor  experienced. 

THE  CONFLICT  OVER  THE  ACCEPTANCE  OF  STATE  BANK 

NOTES. 

The  controversy  over  transfers  was  hardly  begun  when 
disputes  arose  in  regard  to  the  acceptance  of  notes  of 
local  banks  in  current  payment  on  account  of  public 
revenues.  In  the  eastern  cities,  where  the  banks  were 
withdrawing  circulation  in  order  to  effect  resumption, 
there  was  a  “  vacuum  which  had  not  yet  been  filled  by  the 
bills  of  the  Bank  of  the  United  States.”  Under  these 
circumstances,  the  receipt  of  country  money  was  held 
to  be  inevitably  necessary.  But  it  was  in  the  West,  where 
inflation  had  been  carried  to  the  greatest  excess,  that  the 
most  bitter  disputes  arose.  The  Treasury  Department 
insisted  that  in  the  payments  for  public  lands  it  was 
necessary  to  receive  the  bills  of  western  banks  in  good 
credit;  otherwise  these  sales  would  have  been  stopped,  for 
settlers  in  that  section  had  no  other  currency.  The  bank, 
however,  discriminated  against  these  notes  by  entering 
them  as  “special”  instead  of  as  cash.  This  practice 

188 


The  S  e  con  d  u  nit  ed  States  Bank 


Crawford  declared  could  not  be  permitted;  if  it  con¬ 
tinued  the  Treasury  would  select  its  own  banks  for  de¬ 
positories  and  make  independent  arrangements. a  On  this 
point  the  bank  was  not  so  complaisant.  The  receipt  of  paper 
of  distant  banks,  which  the  collectors  of  internal  revenue 
might  deem  of  good  credit  in  their  local  spheres,  was  regarded 
as  hazardous,  especially  as  the  bank,  from  its  experience  in 
transfers  of  deposits,  had  not  been  inspired  with  the  highest 
confidence  in  the  disposition  of  many  of  the  local  banks 
to  fulfill  their  obligations.  Moreover,  it  was  urged  that 
as  long  as  the  notes  of  country  banks  were  acceptable  for 
the  payment  of  taxes  neither  specie  nor  the  bills  of  the 
Bank  of  the  United  States  would  be  employed.  It  was 
held  that  specie  was  in  reality  more  abundant  in  the 
West  than  in  the  East,  and  if  the  receipt  of  country 
paper  was  a  necessity  to  the  Treasury  the  burden  of  any 
loss  or  delay  in  redemption  ought  to  be  borne  by  the  Gov¬ 
ernment  rather  than  by  the  bank.6  Crawford  did  not  yield, 
but  boldly  announced  that  the  Treasury  could  carry  on  its 
operations  independent  of  the  bank  “  without  the  slightest 
inconvenience/’ c  He  would  not  permit  the  interest  of  the 
great  body  of  the  people  to  be  sacrificed ;  after  the  direct 
tax  had  been  paid,  he  was  willing  to  accede  to  the  wishes  of 
the  bank,  and  would  direct  that  only  notes  of  the  branch 
offices  and  such  local  banks  as  made  arrangements  for  their 
redemption  would  be  received  by  the  collectors. d 

The  task,  therefore,  of  securing  the  redemption  of  local 
bank  notes  was  transferred  by  the  Government  to  the  bank, 

“May  6,  1817;  Finance,  4:524.  cMay  19;  Ibid.,  4:527. 

&May  13,  1817;  Ibid.,  4:792.  dIbid.,  4:530. 


189 


National  M  on  et  a  r  y  Commission 


and  the  bank  had  to  suffer  the  odium. a  In  many  instances 
the  local  institutions  threw  every  obstacle  possible  in  the 
way  of  redemption.  The  bank  was  thus  engaged  in  a 
double  contest, — with  the  Treasury  Department  as  well  as 
with  the  local  institutions.  During  the  years  1817-18  the 
sales  of  public  land  were  very  large,  and  many  of  these  were 
made  on  credit,  when  the  notes  of  nearly  all  the  western 
banks  were  receivable  as  good  tender.  Between  the  desire 
of  the  Government  to  obtain  revenue  and  the  unwillingness, 
if  not  inability,  of  local  banks  to  redeem  their  notes  the 
bank  found  it  difficult  to  establish  a  stable  policy.  It  is 
unnecessary  to  narrate  the  long  and  wearisome  contro¬ 
versy  with  the  Government  or  to  describe  the  various 
plans  proposed. 6  This  conflict  with  the  banks  was  far  more 
serious  in  its  final  results,  for,  as  already  intimated,  it 
was  responsible  for  much  of  the  unpopularity  which  for 
many  years  attended  the  bank  in  its  operations  in  the 
West. 

Many  of  the  local  banks  in  the  West  actively  opposed 
T  resumption  if  it  involved  contraction,  tones,  in  October, 
1817,  complained  that  the  circulation  of  the  banks  in 
the  interior  of  Pennsylvania  had  as  little  of  the  quality 
of  money  as  it  had  twelve  months  previously c  and 
more  impatient  yet,  a  month  later,  he  declared  that  in 
appointing  agencies  the  difficulty  was  not  in  selecting 
from  the  multitude  of  small  banks  in  the  interior  of 
Pennsylvania  and  the  northwest  of  Ohio — those  whose 
paper  could  be  converted  into  specie  or  eastern  funds — 

°Dec.  10,  1817;  Finance  4:  361. 

b  Ibid.,  4:848,  577,  845,  846,  583,  853,  854,  587,588. 

clbid.,  4:820. 


The  S  e  con  d  u  nit  ed  States  Bank 


but  in  finding  any  banks  at  all  which  were  able  and  will 
ing  to  fulfill  conditions. a 

Some  of  the  local  banks  resorted  to  trickery,  and  some 
were  forced  to  wind  up  their  affairs.  In  May,  1818,  repre¬ 
sentatives  of  the  bank  were  sent  out  to  hasten  negotia¬ 
tions  with  certain  banks  in  the  West.  The  Virginia 
Saline  Bank  endeavored  to  meet  its  obligations  by  the  col¬ 
lection  of  funds,  and  obtained  judgments  against  its  own 
debtors  sufficient  to  pay  the  bank’s  balance.  The  clerk 
of  the  county,  however,  was  among  those  against  whom 
judgment  had  been  obtained,  and  he  refused  to  issue 
execution.  At  Smithfield  the  bank  had  nothing  but 
eastern  funds,  and  these  they  refused  to  exchange  for 
their  own  notes.  The  German  Bank  refused  positively 
to  pay,  without  giving  any  reason.  The  Commercial 
Bank  of  Bake  Erie,  at  Cleveland,  after  a  sharp  ruse,  got 
possession  of  notes  presented  for  redemption,  and  then, 
breaking  an  agreement  to  redeem,  forced  upon  the  agent 
a  post  note  payable  twenty  days  after  date.  Its  presi¬ 
dent  admitted  that  his  action  was  deliberate,  and  claimed 
that  the  Bank  of  the  United  States  had  converted  its 
offices  into  brokers’  shops,  and  it  was  a  duty  owed  to 
society  to  resist  its  encroachments,  and  that  he  would 
call  upon  other  banks  in  coalition  to  act  in  like  manner. b 

Disputes  over  the  redemption  of  notes  between  the 
bank  and  local  institutions  continued  after  the  settle¬ 
ments  on  account  of  the  transfer  of  deposits  had  been 
made.  The  circulation  of  the  bank  came  into  competi¬ 
tion  with  that  of  state  banks.  In  many  of  the  States 

a Finance,  4:822.  &Ibid.,  4:855-856. 

191 


N  at  ion  a  l  M  on  et  ar  y  Commission 


C 


there  was  no  effective  penalty  for  non-redemption  of  notes 
and  custom  allowed  bills  to  circulate  at  a  discount.  The 
United  States  Bank,  however,  could  not  enjoy  any  such 
privilege.  Its  responsibility  for  protecting  the  soundness 
of  its  credit  extended,  of  course,  to  its  notes,  and  the 
watchfulness  of  its  rivals,  who  were  quick  to  report  any 
infraction  of  the  provisions  of  its  charter,  made  it  imper¬ 
ative  that  it  should  at  all  times  be  in  a  position  to  redeem 
its  bills.  It  was  therefore  necessary  to  demand  the 
redemption  of  notes  of  state  banks  which  came  over  its 
counter.  This  demand,  however,  in  some  sections  was 
regarded  as  unreasonable.  As  intimated,  in  some  parts 
of  the  country  redemption  was  contrary  to  custom. 
Many  banks,  therefore,  were  disposed  to  regard  this 
requisition  as  an  unfriendly  act,  intentionally  designed  to 
cripple  their  activity.  During  the  administration  of 
Cheats,  who  adopted  a  policy  of  contraction,  this  diffi¬ 
culty  was  aggravated  in  the  opinion  of  complaining  banks 
in  the  South  and  West  because  the  branches  did  not 
issue  notes  and  thereby  provide  a  currency  which  might, 
when  it  passed  into  the  vaults  of  the  local  banks,  be  used 
as  an  offset  for  the  claims  presented  by  the  bank.  For 
example,  the  banks  of  Cincinnati  complained  that  there 
were  no  branch  notes  in  circulation  in  that  section,  but 
the  notes  of  the  local  banks  flowed  into  the  branch  through 
the  medium  of  the  land  office.  By  this  means  a  local 
note  was  returned  in  a  few  months  after  it  was  issued 
and  “as  we  find  none  of  the  paper  of  the  United  States 
Bank  in  circulation  here,  we  are  compelled  to  create 
extraordinary  resources  to  redeem  it.”  Liquidation  every 


192 


✓ 


The  Second  United  States  Bank 

thirty  days  was  denounced  as  an  unprecedented  griev¬ 
ances  The  Bank  of  Augusta,  Ga.,  had  the  same  com¬ 
plaint.  It  loaned  its  money  to  land  buyers  and,  of 
necessity,  the  credit  ran  for  a  considerable  length  of 


time.  The  notes  which  thus  went  into 


did  not  rest  on  ordinary  commercial  transactions  which 


would  be  closed  within  brief  periods.  It  had  a  sufficient 


amount  of  coin  for  all  ordinary  mercantile  transactions, 
but  it  could  not  withstand  the  claims  which  might  be 


made  by  any  institution  bent  on  obtaining  specie.6  The 


State  Bank  of  North  Carolina  also  urged,  in  behalf  of 
indulgence,  that  it  was  necessary  to  loan  a  larger  propor¬ 
tion  of  its  funds  to  farmers  and  country  merchants  than 
was  the  case  with  banks  which  transacted  business  by 
running  accounts  and  checks. c  The  Planters’  Bank  and 
the  Bank  of  Georgia  declared  that  the  demand  for  daily 
cash  settlements  was  without  example  in  the  intercourse 
of  banks  in  that  quarter  of  the  Unions  The  Bank  of 
Savannah  denounced  the  requirement  of  such  settlements 
as  a  hostile  act.c  So  great  was  the  opposition  aroused 
that  the  bank  finally  consented  to  weekly  instead  of  daily 
calls. 

The  friction  occasioned  by  the  demand  of  the  bank  01 
the  state  banks  for  the  redemption  of  notes  in  specie  per 
sisted  throughout  the  history  of  the  institution.  In  ; 
report  of  McDuffie’s  Committee  of  Ways  and  Means, 

“Finance,  4:860. 

&June  30,  1819;  Ibid.,  4: 1040. 

cSept.  15,  1819;  Ibid.,  4:  1044. 

djune  21,  1821;  Ibid.,  4:  1055. 

« Ibid. ,4:933;  Sumner,  History  of  Banking  in  All  Nations,  1 : 1 13-1 15. 


7069 — 10 - 13 


193 


National  Monetary  Commission 


April  13,  1830,  reference  is  made  to  the  complaint  then 
existing — that  the  bank  made  heavy  and  oppressive  drafts 
on  the  local  banks  for  specie,  which  compelled  them  to 
curtail  their  own  discounts.  While  conservative  bankers 
in  the  Bast  recognized  the  useful  service  of  the  bank  in 
thus  controlling  local  circulation,  opinion  was  adverse  in 
those  sections  which  claimed  that  their  progress  was  held 
in  check  because  of  a  lack  of  currency.  The  bank  in  the 
West  and  South  exercised  to  a  considerable  degree  the 
same  function  as  the  Suffolk  Bank  did  in  New  England. 
The  making  of  currency  was  easy;  legislatures,  in  spite  of 
penalties  for  non-redemption,  were  tolerant;  and  the  bur¬ 
den  of  keeping  the  currency  sound  fell  in  a  considerable 
measure  on  the  bank.  If  the  issue  of  notes  of  state 
banks  had  been  restricted,  as  it  is  at  the  present  time  or 
as  under  the  free  banking  law  of  New  York,  the  bank 
would  have  fared  better. 

BRANCHES. 

The  provisions  of  the  charter  of  the  Second  Bank  in 
regard  to  the  establishment  of  branches  were  more 
explicit  than  those  to  be  found  in  the  act  of  incorporation 
of  the  First  bank.  In  the  first,  the  power  to  establish 
offices  was  permissive;  in  the  second,  their  organization 
was,  under  certain  conditions,  required.  The  charter 
demanded  that  the  bank  should  establish  an  office  in  the 
District  of  Columbia  whenever  Congress  should  require 
it;  also  an  office  in  any  State  in  which  2,000  shares  were 
subscribed  or  held,  upon  application  of  the  legislature  of 
that  State  or  of  Congress.  The  bank  was  also  permitted 


194 


The  S  econ  d  u  n  it  ed  States  Bank 


to  establish  offices  wherever  it  thought  fit.  If  the  bank 
preferred,  it  could  employ  a  state  bank,  approved  by  the 
Secretary  of  the  Treasury,  to  transact  the  Treasury  busi¬ 
ness.® 

i  ♦ 

The  charter  also  planned  for  the  control  of  the  branches 
by  the  parent  bank.^  All  the  directors  of  the  offices  were 
to  be  appointed  by  the  board  of  the  central  bank;  each 
branch  board  had  the_  right  to  select  a  president  from  its 
own  number,  but  the  power  of  the  selection  of  the  directors 
practically  gave  the  central  board  the  control  of  this 
officer.  It  was  also  provided  that  the  central  bank  could 
make  such  regulations  for  the  business  of  the  offices  as  it 
deemed  just  and  proper.  Consequently,  under  the  rules 
and  regulations  for  the  government  of  the  offices  of  dis¬ 
count  and  deposit,  “it  was  provided  that  the  central 
board  should  appoint  the  cashiers  of  the  offices.”6 

The  bank  did  not  delay  in  the  establishment  of  its 
branches.  In  October,  1817,  19  had  been  designated,  as 
follows : 


Portsmouth,  N.  H. 
Boston,  Mass. 
Providence,  R.  I. 
Middletown,  Conn. 
New  York,  N.  Y. 
Baltimore,  Md. 
Washington,  D.  C. 
Richmond,  Va. 
Norfolk,  Va. 
Charleston,  S.  C. 


Savannah,  Ga. 
New  Orleans,  La. 
Cincinnati,  Ohio. 
Chillicothe,  Ohio. 
Lexington,  Ky. 
Louisville,  Ky. 
Pittsburg,  Pa. 
Fayetteville,  N.  C. 
Augusta,  Ga. 


Fourteen  States  thus  came  within  the  direct  operations 
of  the  bank.  The  organization  of  the  office  at  Augusta 


a  Sec.  11,  clause  14.  &Art.  iv;  Catterall,  Appendix  X,  509. 


195 


National  Monetary  Commission 


was  abandoned.01  Later,  the  branch  at  Middletown  was 
transferred  to  Hartford  and  that  at  Chillicothe  was  dis¬ 
continued.  Eight  others,  as  business  developed,  were 
established,  as  follows: 


Mobile,  Ala _  1826 

Nashville,  Tenn _  1827 

Portland,  Me _  1828 

St.  Louis,  Mo _  1829 


Buffalo,  N.  Y _ 1829 

Burlington,  Vt _ 1830 

Utica,  N.  Y _  1830 

Natchez,  Miss _ 1831 


Every  State  on  the  Atlantic  seaboard,  except  New 
Jersey  and  Delaware,  thus  had  a  branch,  and  in  the 
interior  every  district  except  Indiana  and  Illinois  was 
provided  for.  Many  applications  were  received  to  estab¬ 
lish  other  branches,  but  the  bank  declined,  being  com¬ 
pelled  to  “resist  the  importunities  of  applicants  from 
about  every  State  in  the  Union.” 

Cheves  in  1819  told  Crawford  that  there  were  too  many 
branches:  “For  a  time  we  must  bear  with  them,  but  I 
hope  they  will  be  reduced.”  In  1822  the  stockholders 
at  their  triennial  meeting  recommended  the  withdrawal 
of  some.* 6  The  losses  due  to  the  branches  in  proportion 
to  their  capital  were  ten  times  greater  than  that  of  the 
mother  bank.  In  1831  there  were  under  consideration 
applications  from  at  least  thirty  cities.0  At  the  outset 
commercial  considerations  had  less  weight  in  the  selec¬ 
tion  of  places,  and  the  needs  of  the  Treasury  Depart¬ 
ment  were  an  influential  factor.  LUifortunately,  fiscal 
necessities  were  the  most  urgent  in  the  newly  settled 
sections  where  local  banks  were  under  less  control  and 
where  sound  business  practice  had  not  yet  been  estab- 


a Finance,  4:  820. 

&  House  Report  No.  460,  22nd  Cong.,  1st  sess.,  p.  15. 
c Report  of  Triennial  Meeting  of  Stockholders;  Niles,  41:  112. 

196 


The  Second  United  States  Bank 


lished.  For  this  reason  the  bank  did  not  start  under  fair 
auspices;  it  was  bound  to  come  into  collision  with  local 
institutions  and  to  tolerate  methods  of  administration 
which  injured  its  prestige.  The  pressure  of  the  Govern¬ 
ment  did  not  stop  with  the  initial  organization,  for  later 
the  branches  at  Portland,  Mobile,  and  St.  Touis  were  es¬ 
tablished  at  the  urgent  request  of  the  Treasury  Depart¬ 
ment.®  The  Treasury  Department  also  asked  for  a  branch 
at  Detroit,  and  the  bank  compromised  by  placing  one  at 
Buffalo. 

The  bank,  at  the  beginning  of  its  operations,  did  not 
think  it  wise  to  give  a  definite  capital  to  its  respective 
offices.  According  to  Jones,  the  bank  was  “integral  in  its 
organization,  but  indivisible  in  its  interest.  Its  offices, 
though  distantly  located,  have  no  analogy  to  institutions 
established  by  local  authority,  and  the  apparent  interest 
of  any  particular  office  must  necessarily  be  subordinate  to 
the  general  interest.” b  As  a  result  of  this  policy,  an  exces¬ 
sive  amount  of  the  capital  was  transferred  to  the  South  and 
West.  As  the  investments  of  these  sections,  and  particu¬ 
larly  the  latter,  were  not  so  safely  made,  the  capital 
became  tied  up  and  imperiled.  The  Baltimore  branch, 
which  nominally  had  a  large  capital,  invested  a  con¬ 
siderable  portion  of  it  in  loans  which  became  doubtful 
and  in  stock  discounts  which  could  not  be  made  active. 
When  Cheves  succeeded  Jones  as  president,  he  undertook 
a  policy  of  transferring  the  capital  from  the  western  and 

southern  offices  to  the  northern  branches.  It  was  also 

■■ — — *  -  • 

thought  best  that  definite  capitals  should  be  assigned  to 

“Senate  Doc.  No.  17,  23d  Cong.,  2d  sess.,  p.  225. 

b  Dec.  5,  1817;  Feb.  6,  1818;  Finance,  3:335. 


197 


N  at i o n a  l  M  on  et  ar  y  Commission 


the  several  branches. a  Under  the  old  system  of  unas¬ 
signed  capitals,  the  capitals  of  the  offices  varied  with  the 
daily  transactions,  resulting  in  frequent  conflict  of  inter¬ 
ests;  if  definite  capitals  were  assigned,  it  was  believed 

V 

there  would  be  greater  freedom  of  action  on  the  part  of 
the  management  of  the  different  offices.  It  was  recog¬ 
nized,  however,  that  it  would  be  difficult  at  the  outset  to 
determine  just  what  proportions  should  be  assigned, 
since  the  capitals  of  the  western  offices  could  not  be 
reduced  without  a  severe  and  injurious  pressure  on  the 
debtors.  The  distribution,  therefore,  went  into  effect 
November  i,  1819.  The  following  table  shows  the  distri¬ 
bution  of  capital  at  different  dates: 


[Finance,  4  :  907,  477  ] 


1. 

2. 

3. 

Portsmouth _ _  -  .  _ 

$118, 000 

335.000 

256, 000 

245,000 

5, 646, 000 
556, 000 

1 ,  761 , 000 
862, 000 
678, 000 

1. 935. 000 

1,421, 000 

1 , 666, 000 

1 , 502 , 000 

2, 401 , 000 

1 , 129, 000 

650, 000 
769, 000 
13 , 046, 000 

$200,  000 

300, 000 

200, 000 

1 , 500, 000 

$200, 000 

350, 000 

200, 000 

2, 500, 000 

Providence _ 

Middletown _  _ 

New  York  _  _  _ 

Baltimore  .  _ 

Washington 

500, 000 

1 , 000, 000 

500, 000 

500, 000 

1 , 500, 000 

1 , 000, 000 

1 . 000, 000 

500, 000 

1 , 000, 000 

500, 000 

500, 000 

1 , 500, 000 

1 , 000, 000 

1 , 000, 000 

Richmond 

Norfolk _  __  -  _  _ 

Fayetteville.  _  _ 

Charleston  _  _  _  _ 

Savannah  _  _  .  . 

New  Orleans  _  .  _  _ 

Lexington _ 

Cincinnati _  _  _  _  _  .. 

Louisville _  .  _  _____ 

Chillicothe.  _  .  ...  _ 

Pittsburg _  _  _  _  _  _ 

Philadelphia _  _ _ _ _  _ _ _ 

24, 245,000 

1 , 500,000 

Boston _  .  -  _ 

500, 000 

Column  1:  May,  1819,  before  the  assignment  went  into  effect. 

Column  2:  Proportions  assigned  by  the  bank  for  November,  1819. 

Column  3:  December,  1822,  at  which  time  certain  modifications  had  gone  into  effect. 


a  Finance,  4:  906. 

1 98 


The  S  e  con  d  United  States  Bank 


It  will  be  observed  that  in  the  capital  assigned  to 
Philadelphia  is  included  all  the  property  and  debts  due 
the  bank,  including  debts  due  by  the  state  banks  and  the 
$7,000,000  of  5  per  cent  stock  subscribed  by  the  Govern¬ 
ment.' a  Here  again  the  bank  was  open  to  criticism,  for  the 
capital  was  not  distributed  according  to  the  commercial 
importance  of  the  respective  localities. 

At  the  beginning  of  its  operations,  Baltimore  did  by 
far  the  largest  amount  of  business,  largely  due  to  specu¬ 
lative  operations  of  its  officers.  Its  loans  in  1818  nearly 
equaled  those  of  the  central  bank  at  Philadelphia.  Each 
of  these  two  made  approximately  one-fourth  of  the  dis¬ 
counts  at  that  time.  The  following  brief  table  shows  the 
loans  of  the  principal  offices  in  June,  1818: 


Philadelphia. 

Baltimore _ 

Richmond  __ 
Charleston  __ 
New  York_  _ 
Cincinnati.  _ 
Lexington.  _ 
New  Orleans 

Norfolk _ 

Washington  . 


$10,  832,  000 
9,  289,  000 
3,  041, 000 
2,  786,  000 
2,  016,  000 
1,  825,  000 
1,  620,  000 
1 , 44 1 ,  000 
i,  403,  000 
1,  392,  000 


Between  Baltimore  and  its  nearest  competitor,  Rich- 

*  - 

mond,  there  was  a  wide  gap.  The  business  of  the  four 
New  England  offices  did  not  equal  that  of  Cincinnati, 

i  * 

which  was  sixth  in  order.  Boston  was  thirteenth  in  the 
total  number  of  nineteen,  including  the  parent  office; 
even  New  York  was  fifth.  Baltimore  quickly  lost  its  pre¬ 
ponderating  influence,  and  the  activities  of  the  bank  were 


“Finance,  3:593;  for  distribution  in  1832,  see  H.  R.  No.  460,  2 2d  Cong., 
1  sess.,  p.  316. 


199 


N  a  t  i  o  n  a  l  M  on  et  a  r  y  Commission 


shifted  to  the  South  and  West.  In  1825  the  loans  of  the 
several  offices  were  as  follows: 


Portsmouth  _ 

Boston  _ 

Providence _ 

Middletown  and  Hartford 

New  York _ 

Philadelphia _ 

Pittsburg _ 

Baltimore _ 

Washington _ 

Richmond _ 

Norfolk _ 

Fayetteville _ 

Charleston _ _ 

Savannah _ 

New  Orleans _ 

Louisville _ 

Lexington _ 

Cincinnati _ 

Chillicothe _ 


Loans. 


$437, 000 
1 , 790, 000 
440, 000 
536, 000 
4, 895 , 000 
3, 723.000 
730, 000 
4, 03 1 , 000 
1 , 294, 000 
1 , 226, 000 
696, 000 
457, 000 
2, 428, 000 
626, 000 
2, 455  000 
1 , 069, 000 
1 , 002 , 000 
1,329, 000 
450, 000 


Bills  of 
exchange. 


$5, 000 
221 , 000 
159, 000 
82 , 000 
223 , 000 
784, 000 
85,000 
250, 000 
41 . 000 
90, 000 


92 , 000 
367, 000 
150, 000 
1,017, 000 
128, 000 
60, 000 
149, 000 
1 1 , 000 


Here,  again,  it  is  seen  that  instead  of  taking  a  position 
of  leadership  in  the  banking  operations  of  the  whole 
country,  the  bank  adopted  a  policy  of  supplementing 
banking  facilities  in  those  sections  where  there  was  weak¬ 
ness.  Biddle  admitted  that  large  amounts  of  the  capital 
were  given  to  those  sections  where  there  was  a  deficiency, 
because  the  production  of  the  great  staples  seemed  to 
require  most  assistance  in  order  to  get  them  into  the 
market.1 a  .As  Catterall  points  out,  one  result  of  the  branch 
.system  was  the  supplying  of  loans  to  the  South  and  West  at 
a  cheaper  rate  than  could  have  been  possible  without  them.4 

“H,  R.  No.  460,  22d  Cong.,  1  sess.,  p.  316. 

&  Catterall,  401. 


200 


The  S  e  c  on  d  u  nit  ed  States  Bank 


Thus  the  bank  undoubtedly  was  a  powerful  factor  in  the 
development  of  the  South  and  West. 

Although  by  its  fundamental  regulations  the  bank 
apparently  had  the  power  to  supervise  and  restrict  the 
branches  in  their  operations,  it  did  not  effectually  exer¬ 
cise  this  right  during  its  early  management.  Southern 
and  western  offices  sold  an  excessive  amount  of  drafts 
which  were  sent  to  the  eastern  offices,  as  Boston  and  New 
York.  Baltimore,  in  particular,  engaged  in  this  practice. 
When  these  drafts  were  sold,  the  bills  of  the  Baltimore 
branch  were  issued  and  remitted  at  the  same  time  to  the 
northern  offices.  This  process  continually  drained  specie 
from  the  Boston  office  and  so  restricted  its  operations 
that  it  could  not,  even  if  it  wished,  make  discounts  of  its 
own.  Although  the  parent  bank  cautioned  the  Baltimore 
office,  the  latter  continued  selling  its  drafts,  “and  such 
was  the  want  of  firmness  or  of  foresight  in  the  parent 
board,  that  after  finding  its  repeated  remonstrances  dis¬ 
regarded,  it  never  removed  one  of  the  offending  directors 
or  took  any  effectual  steps  to  control  them,”  until  on 
August  28,  1818,  the  offices  were  forbidden  to  draw 
on  each  other. a  Until  this  was  done  the  branches  were 
“made  tributary  to  Baltimore.” 

In  Baltimore  the  president  and  cashier  were  for  a  time 
permitted  to  purchase  or  discount  drafts  and  bills  pay¬ 
able  from  sight  to  sixty  days  without  reference  to  the 
discount  committee  of  the  directors,  and  large  overdrafts 
were  permitted.^  At  Richmond  an  improper  delegation 

“Report  of  Spencer’s  Committee,  Jan.  16,  1819,  Finance,  3:308;  Cheves’s 
Exposition. 

6 Report  of  Committee  of  Stockholders  of  Bank,  Nov.  5,  1819;  Niles, 
17: 165. 


201 


Na  t  ion  a  l  M  on  et  a  r  y  Commission 


of  power  to  the  cashier  was  granted,  in  authorizing  him 
to  discount  notes  on  stock  at  sixty  days  and  then  at 
four  months,  but  after  three  weeks  the  practice  was 
abandoned." 

OWNERSHIP  OF  STOCK. 

Under  the  act  of  incorporation  the  number  of  shares 
which  could  be  subscribed  by  any  one  person  was  3,000, 
calling  for  $300,000,  or  less  than  1  per  cent  of  the  entire 
capital.  This  was  a  stricter  limitation  than  that  laid 
down  in  the  charter  of  the  First  Bank,  which  permitted 
a  single  subscriber  to  take  1,000  shares,  each  of  a  par 
value  of  $400,  or  4  per  cent  of  the  total.  Deceit,  however, 
entered  into  the  subscriptions  of  the  stock  for  the  Second 
Bank;  there  was  an  “illegal  and  reprehensible  division 
of  the  stock.”  Although  the  charter  provided  that  no 
person  should  have  more  than  30  votes,  when  subscrip¬ 
tion  was  made,  shares  were  divided  into  small  parcels, 
varying  from  1  to  20  shares  to  a  name,  held  in  the  names 
of  persons  who  had  no  interest  in  them,  so  that  votes 
could  be  given  for  the  pretended  proprietors.  The  object 
of  this  arrangement  was  to  influence  elections;  in  Balti¬ 
more  1,172  shares  were  taken  in  1,172  names  by  George 
Williams  as  attorney,  all  of  which  in  reality  he  owned  him¬ 
self.  One-seventh  of  the  shares  owned  in  Baltimore 
gave  one-fourth  of  all  the  votes;  and  Philadelphia,  which 
owned  nearly  one-third,  controlled  two-ninths  of  the 
votes.  In  Baltimore  15  persons  had  command  of  three- 
fourths  of  the  stock  held  in  that  city.*  The  bank  at  the 

a Finance,  3:313. 

&  Report  of  Spencer’s  Committee,  Ibid.,  3:314. 


202 


The  S  econ  d  u  nit  ed  States  Bank 


outset  thus  fell  into  the  hands  of  speculators.  Moreover, 
it  is  to  be  noted,  that  in  not  insisting  rigidly  upon  the 
payment  of  installments  when  due,  speculative  stock¬ 
holders  were  able  to  hold  shares  which  otherwise  would 
have  reached  the  hands  of  solid  capitalists  who  would 
have  held  only  what  they  could  pay  for.rt  The  charter 
was  therefore  defective  in  not  defining  more  precisely 
the  duties  and  powers  of  the  judges  of  elections,  for 
there  was  no  way  by  which  these  officials  could  hinder 
violations  of  the  law.6  As  a  result  of  this  experience, 
corrective  legislation  was  subsequently  enacted,  which 
made  it  impossible  for  a  stockholder  to  cast  more  votes 
than  he  was  entitled  to. c 

The  speculative  character  of  the  holdings  in  1817  is 
evidenced  by  the  statistics  of  shareholdings.  In  1817 
there  were  recorded  31,349  stockholders;  in  1820,  how¬ 
ever,  this  number  was  reduced  to  2,720;  in  1831,  there 
were  4,145.  In  this  latter  year  the  largest  number  of 
names  is  to  be  found  in  Pennsylvania,  namely,  937;  there 
were  466  foreign  against  3,679  domestic  stockholders. 
The  foreign  stockholders  owned  79,159  shares;  of  the  3,679 
domestic  stockholders,  about  one-fifth  (766)  were  holders 
of  5  shares  and  under.  More  than  one-fourth  of  the  total 
stock  was  owned  by  females,  trustees,  executors,  and  by 
religious,  benevolent,  and  other  associations. d  Owner¬ 
ship  by  this  class  became  marked  as  early  as  i82o.e 

a Report  of  Spencer’s  Committee,  Finance,  3:310. 
b  Annals  of  Congress,  15th  Cong.,  2  sess.,  3:  1344-1345,  1391,  1392. 
clbid.,  4:  2522. 
dNiles,  41:112. 

«See  Memorial  of  the  Bank,  Jan.  12,  1821,  Finance,  3:591. 


203 


National  M  o  n  et  a  r  y  Commission 


The  following  table  shows,  in  brief,  the  concentration  of 
ownership  at  successive  dates  in  the  States  of  Pennsylvania, 
New  York,  Maryland,  and  South  Carolina.  It  also  shows  the 
ownership  of  stock  by  the  Government  of  the  United  States, 
by  the  bank  itself,  and  by  foreigners.  It  will  be  observed 
that  the  latter  greatly  increased  their  holdings  after  1828: 


1820. 

1821. 

1822. 

1823. 

1828. 

1831. 

1832. 

Pennsylvania. 

37.334 

36, 231 

37. 268 

37. 269 

70, 763 

52, 638 

51. 028 

New  York _ _  _ 

23.543 

28, 116 

44, 200 

40, 289 

46, 638 

32,903 

30, 881 

Maryland. 

41, 528 

42, 702 

37. 748 

38, 490 

34.  262 

34. 503 

34, 235 

South  Carolina - 

47. 458 

40, 199 

33. 444 

29. 685 

35. 495 

40. 674 

40, 242 

Total _ 

149.863 

147, 248 

152, 660 

145. 733 

187, 158 

160, 718 

156,386 

United  States  _  . 

70, 000 

70, 000 

70, 000 

70, 000 

70, 000 

70, 000 

70, 000 

In  other  States _ 

62 , 770 

66, 173 

61,369 

66,oix 

46, 820 

40, 123 

39,559 

Bank  of  the  United 

States _ 

38, 079 

36, 179 

37. 654 

38, 239 

5.6io 

Foreigners _ 

29, 288 

30, 400 

28,317 

3°. 017 

40,412 

79, 159 

84,055 

As  a  result  of  the  failure  of  debtors  of  the  branch  at 
Baltimore  and  other  places  to  the  number  of  37,954  shares, 
there  was  a  forfeiture  of  stock  and  the  capital  of  the  bank 
was  decreased  by  $3, 79 5, 400. a  Efforts  were  made  to  per¬ 
suade  Cheves  to  sell  this,  but  he  thought  that  the  capital 
was  too  large.  In  1825,  however,  the  bank  sold  its  stock 
at  1 19  and  the  profits  in  the  first  six  months  of  that 
year  amounted  to  $48 1,000. 6 

LOANS  ON  BANK  STOCK. 

In  regard  to  the  business  of  loaning,  the  following 
charter  provisions  were  laid  down: 

1 .  Not  more  than  6  per  cent  per  annum  could  be  charged 
as  interest. 

0 Cheves,  29;  Niles,  23:95. 

bH.  R.  No.  460,  2 1st  Cong.,  1  sess.,  pp.  2^2-255,  294. 


204 


The  Second  U  nit  ed  States  Bank 


2.  Loans  to  the  United  States  were  limited  to  $500,000 
and  to  any  one  of  the  States  to  $50,000;  no  loan  could  be 
made  to  a  foreign  state  unless  authorized  by  law. 

3.  In  case  loans  were  made  to  the  Government  in  excess 
of  the  above  limitations,  every  person  who  was  implicated 
in  such  approval  or  in  such  loan  should  forfeit  treble  the 
value. 

4.  Once  in  three  years  the  management  was  ordered  to 
lay  before  the  stockholders  a  statement  of  debts  which  had 
remained  unpaid  for  a  period  of  treble  the  term  of  credit. 

The  above  provisions  were  practically  identical  with 
those  in  the  charter  of  1791.  The  by-laws  also  provided: 

1.  That  bills  and  notes  for  discount  should  be  delivered 
on  Mondays  and  Thursdays  and  laid  before  the  directors 
on  Tuesdays  and  Fridays. 

2.  Discounts  should  not  be  made  upon  personal  security 
without  two  responsible  names,  but  if  stock  of  the  bank, 
funded  debt  of  the  United  States,  or  such  other  property 
as  should  be  approved,  be  pledged,  one  responsible  name 
might  be  taken. 

3.  It  was  also  provided  in  the  by-laws  of  1816,  but  sub¬ 
sequently  modified,  that  no  accommodation  notes  should 
be  discounted  unless  payment  was  secured  by  deposit  of 
bank  or  government  stock  or  other  approved  property. 

4.  On  each  application  for  discount  every  director  who 
was  present  should  give  his  opinion,  and  no  discount  was 
to  be  made  without  the  consent  of  three-fourths  present. 
All  such  notes  were  to  be  entered  in  a  book  in  such  manner 
as  to  discover  to  the  board  at  one  view  on  each  discount 
day  the  amount  for  which  any  person  is  indebted  to  the 
bank,  either  a  payer,  discounter,  or  indorser.  (Rule  5.) 


205 


National  Monetary  Commission 

The  principal  characteristic  of  the  discount  business  of 
the  bank  at  the  beginning  of  its  operations  was  the  making 
of  loans  to  stockholders  on  the  pledge  of  bank  stock.  On 
December  18,  1816,  the  directors  agreed  to  discount  sixty- 
day  notes,  secured  by  a  deposit  of  an  equal  amount  of  the 
stock  of  the  bank,  and  authorized  the  branches  at  Boston, 
New  York,  and  Baltimore  to  discount  in  like  manner,  not 
exceeding,  however,  one-tenth  of  the  subscription  to  the 
capital  of  the  bank  at  their  respective  places.  These  loans, 
however,  were  limited  to  the  amounts  called  for  by  the 
second  installment.  This  practice  of  discounting  on  stock 
to  the  full  amount  paid  upon  shares  was  justified  under 
by-law  4.  Discounts  were  here  authorized  on  only  one 
responsible  name,  thus  omitting  the  requirement  of  an 
indorser.a  On  July  25,  1817,  the  board  again  authorized 
the  granting  of  temporary  loans  to  stockholders.6 

On  August  26,  because  of  the  redemption  of  $13,000,000 
of  the  funded  debt,  the  bank  voted  that  as  no  better  se¬ 
curity  could  be  offered  than  the  stock  of  the  bank  at  a 
safe  and  reasonable  evaluation,  as  there  was  good  reason 
to  believe  that  the  banks  in  New  York  and  elsewhere  had 
loaned  upon  the  stock  of  the  bank  at  the  rate  of  $120  a 
share,  and  as  it  was  necessary  to  extend  the  discounts  in 
order  to  earn  a  reasonable  dividend,  it  was  expedient  that 
the  loans  on  bank  stock  be  extended  at  the  rate  of  $125  a 
share  upon  notes  with  two  approved  names.  The  con¬ 
struction  given  to  this  resolution  was  that  the  indorser 
was  held  liable  only  for  the  excess  above  the  par  value.0 
The  regulation  that  indorsers,  on  collateral  security,  be 

“Finance,  3:333.  6 Ibid.,  3:340.  c  Ibid.,  3:441. 


206 


The  S  econd  u  nit  ed  States  Bank 


required  on  the  excess  above  par,  was  moreover  evaded  by 
some  of  the  largest  borrowers  who  indorsed  for  each  other.® 
On  September  30,  1817,  it  was  voted  that  the  president 
and  cashier  be  authorized  to  renew  notes  on  stock  as  they 
became  due  between  discount  days  until  otherwise 
directed. 6 

The  greater  part  of  these  loans  were  renewed  from  time 
to  time,  and  the  notes  in  many  cases  ran  from  four  to  six 
months.  They  were  not  temporary,  therefore,  as  implied 
in  the  resolution  of  July  25,  1817.  Such  loans  were  fre¬ 
quently  renewed,  even  by  the  president  and  cashier,  with¬ 
out  the  intervention  of  the  board.  In  August  and  Sep¬ 
tember,  18 1 7,  by  four  successive  votes,  $500,000  was  placed 
in  the  hands  of  the  president  and  cashier,  without  the  inter¬ 
vention  of  the  board,  to  loan  on  the  pledge  of  bank  stock.0 
Out  of  stock  loans  for  $8,047,000,  at  least  $5,231,000  was 
constantly  renewed. d  Although  such  loans  were  recorded, 
they  apparently  caused  no  comment,  the  directors  think¬ 
ing  that  they  had  no  business  to  inquire  into  the  loaning  on 

* 

stock.  Discounts  thus  made  were  commonly  to  speculators 
and  brokers  and  in  many  instances  were  excessive,  amount¬ 
ing  to  single  individuals  to  sums  of  $365,000,  $400,000,  and 
$1 ,800,000. e 

From  the  opening  of  the  bank  to  July  30,  1817,  notes 
secured  by  the  pledge  of  bank  stock  were  discounted  to 

«  Finance,  3:311. 

bibid.,  3:341;  for  blank  form  used  in  obtaining  such  loans,  ibid. 

cIbid.,  3:346. 

d  Ibid.,  3:  337. 

«  Annals  of  Congress,  15th  Cong.,  2  sess.,  4:  1292,  1311;  see  also  Finance, 
3-337- 


207 


National  M  o  n  et  a  r  y  Commission 


the  amount  of  $8,047,000.®  The  amount  which  remained 
unpaid  on  the  latter  date  was  $5,321,000.  These  loans 
were  subsequently  increased,  running  from  $9,913,000  in 
October,  1817,  to  $10,335,000.  The  largest  amount  dis¬ 
counted  in  bank  stock  was  in  January  and  February,  1818, 
when  it  amounted  to  $1 1 ,245,000.  The  parent  board  was 
responsible  for  this  policy,  as  is  seen  in  the  returns,  for  on 
October  20,  1818,  such  loans  were  as  follows: 

Philadelphia _ $4,681,000 

Baltimore _  2,402,000 

Charleston _  897,000 

Washington _ _ _  299,  000 

Richmond _  210,  000 

At  each  of  the  other  offices  the  amount  was  less  than 
$100,000.*  6 

The  directors  avowed  that  they  intentionally  and  uni¬ 
formly  gave  preference  to  stock  notes  over  business 
paper.0  As  the  capital  in  government  securities,  which 
had  been  relied  upon  by  the  “reasonable  expectation 
of  stockholders,”  had  been  lessened  by  the  redemption 
of  $13,000,000  of  government  stock,  the  bank  com¬ 
plained  that  it  had  been  deprived  of  a  profitable  form 
of  investment,  and  under  these  circumstances  it  did 
not  appear  wise  to  enlarge  the  general  line  of  dis¬ 
counts  until  the  course  of  exchange  was  determined  and 
the  currency  had  been  established  upon  a  sounder 
basis. d  Moreover,  as  the  market  price  of  the  stock 
at  this  time  was  140,  its  acceptance  in  pledge  at  that 
rate  was  justified.  Nor  was  there  a  good  supply  of 


0 Finance,  3:337. 

&Ibid.,  3:312. 


clbid.,  3:  311. 
d  Ibid.,  3:  361 


208 


The  Second  United  States  Bank 


business  paper,  for  the  state  banks  took  the  best  and 
rejected  the  less  desirable.® 

In  1818  inquiry  was  made  as  to  the  legality  of  trans¬ 
fers  of  public  debt  to  the  bank  to  secure  loans.  The 
charter  of  the  bank,  like  those  in  many  state  banks, 
restricted  dealings  in  government  securities,  owing  to  a 
fear  that  state  credit  might  be  affected  by  speculative 
operations.  A  committee,  however,  decided  that  in  the 
present  case  there  was  no  occasion  for  concern  or  con¬ 
gressional  action. 

Although  there  was  a  reduction  in  loans  on  bank  stock 
when  a  change  in  the  administration  of  the  bank  took 
place  in  October,  1818,  the  general  policy  was  not  aban¬ 
doned.  A  rule  was  established  to  reduce  the  discounts 
at  Philadelphia,  which  had  been  granted  on  bank  stock, 
at  the  rate  of  5  per  cent  every  sixty  days,  but  this  small 
reduction  “was  the  subject  of  loud,  angry,  and  constant 
remonstrances  among  the  borrowers,  who  claimed  the 
privileges  and  the  favor  which  they  contended  were  due 
to  stockholders,  and  sometimes  succeeded  in  communi¬ 
cating  their  sympathies  to  the  board.”6  For  several  years 
these  loans  amounted  to  about  $6,000,000,  or  about  one-fifth 
of  the  total.  Biddle  discountenanced  such  loans,  as  they 
had  a  tendency  “to  lock  up  the  funds”  of  the  bank.0 
During  the  crisis  of  1825  he  permitted  some  departure 
from  his  general  principle  on  the  ground  that  merchants 
who  held  bank  or  government  stock  should  be  favored, 

a  Origin  and  Progress  of  the  Second  Bank,  by  Friendly  Monitor,  1819, 
p.  20. 

&Cheves,  Exposition,  Goddard  Edition,  p.  no. 

cCatterall,  100. 


7069 — 10 


14 


209 


4 


N  a  t  ion  a  l  M  o  n  et  a  r  y  Commission 

as  there  was  at  the  moment  no  outside  market  for  such 
securities.0  Between  1825  and  1831  there  was  contrac¬ 
tion,  until  in  the  latter  year  there  was  less  than  $1 ,000,000 
of  such  loans.6 

CHANGE  IN  CHARACTER  OR  CAPITAL. 

During  the  first  two  years  of  the  operations  of  the  bank 
its  capital  rapidly  changed  in  form.  At  the  outset  a  large 
proportion  was  in  government  securities;  for  example,  in 
April,  1817,  out  of  total  funds  of  $46,880,000,  one-half  was 
in  government  stock.  One  of  the  reasons  originally 
assigned  for  large  capitalization  was  the  desirability  of 
absorbing  a  large  amount  of  the  funded  indebtedness,  but 
the  bank  had  hardly  opened  its  doors  before  there  was  a 
favorable  turn  in  the  government  finances  which  led  to 
a  surplus  of  receipts  over  expenditures  and  a  consequent 
rise  in  the  value  of  government  securities.  By  the  charter 
provisions  the  Government  could  redeem  any  part  of  its 
funded  debt  subscribed  to  the  capital  of  the  bank  at  the 
rates  fixed  at  the  time  of  subscription.  The  Treasury 
Department,  therefore,  determined  that  it  was  more 
profitable  for  the  Sinking  Fund  commission  to  use  its 
surplus  by  the  purchase  of  the  government  stock  lodged 
with  the  bank,  since  it  could  be  bought  in  at  a  lower  rate 
than  that  held  outsider  The  bank  did  not  favor  this 
redemption,  for  the  part  to  be  redeemed  was  a  productive 
portion  of  the  funded  debt  of  its  capital,  and  there  were  no 
adequate  means  for  the  employment  of  so  large  an  amount 

“Catterall,  107 
b  Niles,  41 :  1 17. 

cCrawford  to  Jones,  May  18,  1817;  Finance,  4:  525. 


210 


The  Second  United  States  Bank 


in  cash  as  would  result  from  the  sale.a  The  Treasury 
Department,  however,  persisted  in  its  intentions,  and 
redeemed  $13,044,000  in  July,  1817,  and  continued  this 
policy,  so  that  on  September  30,  1818,  the  capital  of  the 
bank  was  represented  by  only  $7,431,000  of  government 
securities.6  This  practically  left  only  the  stock  note  of 
$7,000,000  which  had  been  originally  subscribed  by  the 
Government,  which  was  held  until  its  redemption  in  1831. 

When  Cheves  became  president  in  1818,  he  thought  it 
wise  to  make  larger  investments  in  government  securities. 
The  bank  consequently,  in  1820,  purchased  $2,000,000  of 
government  6  per  cent  stock,  and  in  1821,  $4,000,000  5  per 
cent.0  Biddle  also  made  a  large  purchase  in  1824.  The 
following  table  shows  in  brief  the  amount  of  government 
funded  debt  which  the  bank  held  from  1819  to  1831 : 


1819  _ $7,400,000 

1820  _  7,200,000 

1821  _  9,200,000 

1822  _  13,300,000 

1823  _  11,100,000 

1824  _  10,900,000 

1825  _  18,400,000 

1826  _  18,300,000 

1827  _ 17,800,000 

1828  _  17,600,000 

1829  _  16,100,000 

1 830  _  11, 600, 000 

1831  _  8,700,000 


GOVERNMENT  DEPOSITS. 

By  the  charter  of  the  bank  the  public  funds  deposited 
in  places  where  the  bank  or  its  branches  were  established 


a  President  Jones  to  Crawford,  May  16,  1817;  Finance,  4:  793. 
b  Ibid.,  3 :  292. 

^Cheves,  Exposition,  22,  30;  also  Niles,  23:91,  95. 


21 1 


N  at i o n a l  Mone  t  a  r  y  Commission 


must  be  deposited  in  them  unless  there  were  urgent  reasons 
to  the  contrary.®  In  places  where  there  was  no  branch 
this  obligation  to  deposit  the  public  money  in  the  bank 
did  not  exist,  and  the  Treasury  could  deposit  in  state 
banks  according  to  its  own  arrangements.  Crawford,  how¬ 
ever,  desired  that  the  bank  should  be  the  sole  depository. 
The  internal-revenue  laws  were  still  in  force,  necessitating 
collections  in  remote  and  sparsely  populated  districts,  and 
the  Government  enjoyed  large  receipts  from  the  sale  of 
public  lands.  It  was  expected  that  the  internal-revenue 
laws  would  be  repealed  within  a  year,  and  the  sale  of 
public  lands  fluctuated  so  widely  at  different  points  that 
no  dependence  could  be  placed  upon  this  source  of  govern¬ 
ment  business  which  would  justify  the  bank  in  establishing 
an  office  in  any  particular  place  to  meet  this  particular 
emergency.  The  bank,  therefore,  was  not  ready  to  organ¬ 
ize  an  office  of  its  own  in  every  district  simply  because  it 
would  serve  the  convenience  of  revenue  officers.  From 
the  Government  point  of  view,  however,  it  could  not  be 
expected  that  a  collector  who  lived  at  a  great  distance 
from  the  branch  should  deposit  in  that  office  more  than 
two  or  three  times  a  year,  and,  on  the  other  hand,  it  was 
unwise  to  expose  the  collector  to  the  temptation  of  keep¬ 
ing  large  sums  for  long  periods.6 

It  was  therefore  agreed  by  the  Treasury,  as  well  as  by 
the  bank,  that  state  institutions  should  be  used  as  “inter¬ 
mediate”  places  of  deposit.  The  selection  of  these  agen¬ 
cies  and  the  arrangements  to  be  made  with  them  was  left 
to  the  bank  by  Crawford.0  In  choosing  the  agencies  the 

° Sec.  1 6.  b  Finance,  4: 506,530.  c  Ibid.,  4: 498. 


212 


Th  e  Secon  d  U  nited  States  Bank 


bank  moved  with  caution,  for  it  was  already  involved  in 
disputes  with  western  banks  because  of  the  delays  in  the 
transfer  of  public  funds  which  had  previously  accumulated 
and  because  of  the  depreciation  of  the  notes  in  which  the 
state  banks  were  disposed  to  pay  their  balances.  It  con¬ 
sequently  hoped  that  as  few  intermediate  agencies  as 
possible  would  be  needed.0  When  Crawford  urged  the 
prompt  selection  of  agent  banks  in  the  interior  of  Penn¬ 
sylvania  and  northwest  of  the  Ohio,  owing  to  the  sale  of 
public  lands, h  the  bank  asked  the  Treasury  to  forego  the 
use  of  state  banks  entirely  in  the  northwest,0  but  Craw¬ 
ford  would  not  accede  to  this.  It  was  desirable  to  secure 
places  of  deposit  convenient  to  the  land  offices,  and  the 
public  receipts  were  too  large  to  be  exposed  to  the  dangers 
of  distant  transportation. 

Under  the  arrangements  which  the  bank  made  with  the 
Treasury,  all  deposits  received  either  at  its  own  offices  or 
at  the  banks  employed  as  agents  were  passed  to  the  credit 
of  the  bank  for  the  use  of  the  Government  and  corre¬ 
sponding  credits  were  entered  on  the  books  of  the  bank  to 
the  Treasury. d  In  other  words,  the  Treasury  did  not  con¬ 
cern  itself  with  the  character  of  the  money  in  which  the 
payments  of  its  collectors  were  made  to  the  bank  and  its 
agencies;  the  responsibility  was  left  entirely  to  the  bank. 
This  agreement  was  made  in  April,  1817,  before  the  bank 
clearly  realized  the  struggle  which  it  would  have  to  make 
to  enforce  payments  in  legal  currency,  and  apparently  the 
bank  did  not  understand  how  far  its  liability  was  likely  to 

a  Finance,  4:  775.  c  Ibid.,  4:  821. 

b Ibid.,  4: 553.  d  Apr.  17,  1817;  Ibid.,  4:  783 

/ 


213 


National  M  on  et  a  r  y  Commission 


extend  in  case  depreciated  currency  was  turned  in.  As  the 
culmination  of  much  correspondence  between  Crawford 
and  Jones  in  June,  1818,  the  former  notified  the  bank  that 
it  was  responsible  for  all  money  which  was  deposited  in 
the  state  banks  selected  for  that  purposed  The  bank  felt 
compelled  in  self-protection  to  abandon  the  agreement, 
and  henceforth  state  banks  in  places  where  branches  were 
not  serviceable  were  selected  directly  by  the  Treasury 
Department.  As  a  result,  the  use  of  a  certain  part  of  the 
Government  deposits  was  lost. 

The  bank  was  still  obliged  to  be  on  its  guard  in  its 
receipt  of  government  funds.  In  July,  1820,  Crawford 
proposed  a  revision  of  the  instructions  as  to  the  kinds  of 
money  to  be  received  in  payment  of  public  lands;  and 
among  the  notes  receivable  he  included  those  of  the  banks 
in  the  District  of  Columbia  with  the  exception  of  two.6 
Cheves  assented  in  the  main  to  Crawford’s  suggestions  but 
objected  to  crediting  as  cash  to  the  Treasury  the  notes  of 
the  banks  of  the  District  of  Columbia,  if  they  were  not  punc¬ 
tually  paid. c  He  also  added  that  it  would  be  better  for  the 
government  receivers  to  make  a  demand  for  acceptable  cur¬ 
rency,  since  no  odium  attached  to  requests  made  by  the 
agents  of  the  Treasury  “  unless  the  agent  happened  to  be  the 
Bank  of  the  United  States,  which  from  the  habit  of  railing 
against  it,  were  the  plague  to  visit  the  land,  would  not 
improbably  be  charged  with  having  winged  the  ‘  Destroy¬ 
ing  Angel.’  ” d  Crawford  assented  to  this  and  agreed  that 
notes  which  were  not  punctually  paid  upon  presentment 
should  be  charged  to  the  Treasury.6 

“Finance,  4:  587,262.  c ibid.,  4: 935.  «  Ibid.,  4:  670. 

b Ibid.,  4: 669.  d  Ibid.,  4:935. 


214 


The  S  e  con  d  United  States  Bank 


Although  the  government  deposits,  as  a  whole,  were 
profitable  to  the  bank,  the  relationship  which  was  thereby 
involved  was  not  without  its  drawbacks.  At  the  begin¬ 
ning  of  its  operations  the  bank  was  forced  to  establish 
branches,  which  proved  unprofitable  and  difficult  to  man¬ 
age,  and  later,  at  the  request  of  the  Treasury  Department, 
because  of  its  dissatisfaction  with  the  services  of  state 
banks  which  were  employed  as  agents,  it  organized  offices 
to  aid  the  Government  rather  than  to  meet  commercial 
necessities.0  Crawford  thought  that  the  treasury  deposits 
in  the  western  branches  was  a  positive  injury  to  the  bank, 
for  it  tempted  these  offices  to  make  excessive  discounts. 
This  made  exchange  still  more  unfavorable,  necessitating 
the  transfer  of  specie  to  the  Bast,  and  this  withdrawal 
of  specie  caused  irritation  against  the  bank.6 

In  1828  the  question  was  raised  as  to  whether  the  bank 
should  not  pay  interest  on  the  government  deposits.  A 
Senate  committee,  however,  reported  that  this  could  not 
be  demanded  without  a  direct  violation  of  the  charter: 
In  the  bonus  and  the  services  rendered  by  the  bank  the  . 
United  States  had  been  promptly  paid  for  all  the  advan¬ 
tages  derived  from  the  deposit  of  its  funds  in  that  insti¬ 
tution.6  The  bank  proved  to  be  a  safe  depository;  the 
Government  did  not  lose  a  dollar  from  this  connection. 
The  total  amount  cared  for  during  the  existence  of  the 

a  Portland,  Mobile,  Natchez,  Buffalo,  St.  Louis;  Rush  to  Biddle,  Jan. 
26,  1826;  Sen.  Doc.,  No.  17,  23d  Cong.,  2d  sess.,  pp.  254-255. 

b  Finance,  4:641. 

c  Report  of  Senate  Committee  on  Finance,  Apr.  21,  1828;  also  report  of 
same  committee,  Feb.  20,  1829. 


215 


N  at  i  o  n  a  l  M  on  et  a  r  y  Commission 


bank  was  $410,000,000.°  For  the  period  1817-1836  the 
public  deposits  were  as  follows : 


1817.  _ _ $10,200,000 

1818  _  7,400,000 

1819  _ 1 _  2,900,000 

1820  _  3,600,000 

1821  _  2,900,000 

1822  _  2,600,000 

1823  _  4,300,000 

1824  _  10,200,000 

1825  _  6,700,000 

1826  _ 5,800,000 

1827  _  8,900,000 

1828  _  8,400,000 

1829  _  10,700,000 

1830  _  9,700,000 

1831  _  9, 100, 000 

1832  _  12,600,000 

1833  _ 12,800,000 

1834  _  4,000,000 

1835  _  2,600,000 

1836  _ i__  600,000 


It  will  be  observed  that  there  were  wide  fluctuations, 
and  if  figures  were  supplied  by  months  the  changes  would 
appear  still  more  marked.  Considering  the  total  resources 
available  for  loaning,  a  change  of  $5,000,000  within  a  few 
months  meant  a  serious  disturbance  in  facilities  for  dis¬ 
counts.5 

TRANSFER  OF  PUBLIC  FUNDS. 

Under  the  charter  the  bank  was  obliged  to  give  the 
necessary  facilities  for  transferring  the  public  funds  within 
the  United  States  without  charging  a  commission  or  claim¬ 
ing  an  allowance  on  account  of  difference  in  exchange.0 
In  the  arrangements  originally  adopted  it  was  agreed 

aCatterall,  465.  cSec.  15. 

b Gouge,  Paper  Money  and  Banking,  199. 


216 


The  S  e  con  d  u  nit  ed  St  at  es  Bank 


that  the  Treasurer  of  the  United  States  could  draw  upon 
the  bank  at  any  place  where  the  public  money  was  de¬ 
posited,  whether  there  were  public  funds  at  the  time  at 
that  place  or  not,  with  the  understanding,  however,  that 
reasonable  notice  should  be  given.  Difficulties  imme¬ 
diately  arose  because  of  lack  of  sufficient  notification. 
In  August,  1817,  the  Treasurer  of  the  United  States  drew 
upon  the  bank  at  Philadelphia  for  $11,000,000.  As  there 
was  not  that  sum  to  the  credit  of  the  Government  at  the 
mother  bank,  the  cashier  complained  and  asked  that  the 
draft  should  be  made  payable  at  the  offices  from  whence 
the  money  was  intended  to  be  drawn,  so  that  the  bank 
could  place  the  funds  at  the  points  desired.®  The  Treas¬ 
ury,  however,  replied  that  it  kept  no  account  with  the 
offices,  only  with  the  bank,  and  it  was  for  the  bank  to  trans¬ 
mit  the  funds  when  ordered.6 

Again,  in  November,  a  draft  on  the  Richmond  office  for 
$200,000  came  back  unpaid  for  lack  of  a  treasury  balance 
at  that  place.  Crawford  immediately  notified  the  bank 
that  all  treasury  drafts  must  be  paid  by  the  branches  and 
the  state  banks  employed  as  agents,  without  regard  to  the 
amount  of  public  funds  in  their  individual  possession.  He 
agreed  that  if  large  sums  were  to  be  expended  in  places 
where  but  little  public  money  was  collected,  due  notice 
should  be  given,  but  this  could  not  be  done  in  ordinary 
transactions.6'  The  bank,  as  already  stated,  increased 
its  difficulties  by  making  its  branch  notes  payable  at 
any  office  irrespective  of  the  place  of  issue.  In  April, 
1819,  Cheves  asked  for  a  modification  of  the  existing 

^Finance,  4:813-814.  &Ibid.,  4:550.  cIbid.,  4:560,  825. 


217 


N  at  i on  a l  M  on  et  a  r  y  Commission 


agreement,  affirming  that  the  bank  could  not  henceforth 
engage  to  meet  treasury  drafts  except  at  the  points 
where  the  funds  were  collected  or  its  notes  were  made 
payable.0  Later  in  the  year  the  management  proposed 
the  following  rules: 

That  the  Treasury,  when  it  desired  to  use  its  funds 
otherwise  than  where  they  were  deposited,  should  direct 
the  bank  to  transfer  to  the  office  where  the  funds  were 
required  from  the  specific  office  where  they  were  deposited, 
with  allowance  in  time  as  follows: 

From  the  western  offices  to  the  Atlantic  offices,  respec¬ 
tively,  and  vice  versa,  four  months. 

From  and  to  New  Orleans,  in  all  cases,  four  months. 

From  the  offices  south  to  the  offices  north  of  Washing¬ 
ton,  and  vice  versa,  sixty  days. 

From  the  offices  north  of  Washington  to  the  offices 
north  of  Washington,  thirty  days. 

From  the  offices  south  of  Washington  to  offices  south 
of  Washington,  thirty  days. 

That  the  Government  should  only  draw  on  offices  to  the 
amount  of  its  funds  in  those  offices,  respectively,  except 
the  office  at  Washington  where  it  could  draw  at  pleasure; 
and  that  when  the  Government  should  draw  on  a  bank  or 
an  office  not  having  funds  to  meet  the  draft  it  should 
simultaneously  grant  a  draft  in  favor  of  the  bank  or  the 
office  on  the  bank  where  it  had  funds  as  the  bank  might 
designate,  to  cover  such  drafts.6 

To  these  proposals  Crawford  assented.0  The  bank 
consequently  abandoned  the  original  policy  of  President 

a  Finance,  4:  823,  Niles,  17:2.  b  Finance,  4: 909.  c ibid.,  4: 640. 


218 


The  S  e  con  d  u  nit  ed  States  Bank 


Jones,  which  considered  the  bank  as  a  unit,  and  provided 
that  all  the  accounts  of  the  Government  be  kept  with 
the  central  office  rather  than  with  the  several  branches. 
In  carrying  out  these  new  regulations  the  Treasury  noti¬ 
fied  the  bank  weekly  in  regard  to  the  transfers  that 
would  be  needed,  and  in  1829  a  daily  statement  was 
rendered. 

Transfers  for  the  Treasury  during  the  period  1815-1827 
averaged  $28,000,000  a  year.®  When  the  bank  was 
under  attack  there  was  a  decided  division  of  opinion  as  to 
the  benefits  of  the  services  thus  rendered  to  the  Govern¬ 
ment,  and  Catterall  notes  that  adherents  of  the  bank 
were  wont  to  magnify  the  advantages.6  “Its  opponents 
on  the  other  hand  belittled  the  claims  and  asserted 
positively  that  it  possessed  no  special  virtues  in  this  par¬ 
ticular.  Polk  in  his  minority  report  of  March,  1833, 
asserted  that  the  bank  rendered  no  special  service  in 
transferring  government  funds.  Secretary  Woodbury,  in 
1834,  argued  that  the  transfers  were  profitable  to  the 
bank,  and  Gouge,  in  a  pamphlet  issued  in  1837,  made  an 
elaborate  argument  against  the  bank  as  a  necessary  or 
even  a  convenient  treasury.  He  held  that  its  services  in 
this  capacity  had  been  greatly  overrated,  and  that  at 
those  points  where  the  transfers  incurred  risk  or  expense 
the  Government  was  compelled  to  be  its  own  carrier,  and 
that  a  private  merchant  occupying  a  position  similar  to 
that  of  the  bank  would  have  made  an  immense  fortune.,>c 

“Catterall,  468.  * 

^Gallatin’s  Writings,  3:328-329,  345;  Colton,  Works  of  Clay,  5.615; 
Webster’s  Works,  3.401-402,  4:201. 

c  Catterall,  466. 


219 


N  at i o n a l  M  on  et  a  r  y  Commission 


After  analyzing  the  evidence,  Catterall  concludes  that  the 
transfer  of  the  funds  was  a  great  convenience  and  saving 
to  the  Government.  Even  if  a  profit  was  made  by  the 
bank,  it  did  not  follow  that  the  Government  lost.  More¬ 
over,  the  bank  possessed  three  very  definite  advantages 
over  the  state  banks  in  performing  this  service:  “Its 
notes,  checks,  drafts,  and  bills  of  exchange  were  willingly 
received  everywhere  from  Montreal  to  the  City  of  Mexico. 
A  credit  so  extensive  made  possible  a  system  of  domestic 
exchange  by  means  of  which  the  funds  of  the  Government 
were  transported  from  place  to  place,  always  at  a  very 
low  rate  and  frequently  with  a  profit  to  the  bank.  In  the 
third  place  all  this  was  made  easier  and  the  system  of 
exchange  rendered  of  the  highest  efficiency  by  the  organi¬ 
zation  of  the  bank  with  its  twenty-five  offices  scattered 
through  the  Union.”0  It  is  estimated  that  if  a  rate  of 
one-fourth  of  i  per  cent  had  been  charged  the  Gov¬ 
ernment  would  have  had  to  pay  over  $60,000  a  year. 
For  the  seventeen  years  which  the  bank  was  a  public 
depository  the  Government  thus  saved  a  little  over 
$1,000,000. 5 

CIRCULATION. 

That  the  new  institution  would  put  an  end  to  the  evils 
of  the  depreciated  local  currency  was  the  common  expec¬ 
tation,  and  apparently  the  bank  began  its  operations  with 
a  desire  to  meet  this  demand.  The  measures  which  it 
adopted,  however,  were  ineffective;  the  management  did 
not  understand  the  principles  upon  which  a  sound  note 
currency  is  based.  It  agreed  to  redeem  the  notes  of  the 

^Catterall,  467.  &Ibid.,  468. 


220 


Th  e  Second  United  States  Bank 


parent  office  and  all  the  branches  north  of  Charleston, 

indiscriminately ,  at  any  other  office.  Although  the  capital 

* 

of  the  bank  was  large,  its  specie  holdings  were  small. 
Even  if  these  had  been  larger,  the  bank  began  without  an 
adequate  experience  from  which  it  could  determine  the 
points  at  which  the  specie  would  be  needed  for  purposes  of 
redemption.  The  management  either  was  ignorant  of  the 
facts  in  regard  to  the  course  of  trade  between  the  different 
sections  of  the  country  or  failed  to  appreciate  the  superior 
power  of  economic  law.  As  the' notes  of  each  office  were 
payable  at  all  the  other  offices  and  the  office  issuing  them 
was  not  exclusively  liable  for  their  redemption,  and  as 
discounts  were  made  without  limit,  regardless  of  trade 
conditions,  an  impossible  situation  was  created.  More¬ 
over,  the  offices  in  the  South  and  West  were  encouraged 
to  make  large  loans. 

The  bank,  indeed,  criticised  the  branches  for  not  increas¬ 
ing  their  circulation.  When  the  branch  at  Lexington 
made  use  of  local  bank  paper  or  specie,  instead  of  its  own 
notes,  the  president  of  the  parent  bank  (Oct.  4,  1817) 
called  the  management  to  account,  writing  that  “the 
wants  of  the  country  and  the  interest  of  the  bank  require 
an  extensive  circulation  of  its  paper,  and  it  is  the  policy 
of  the  parent  board  to  encourage  the  indiscriminate  use 
of  the  notes  of  the  bank.”a  As  the  balance  of  trade 
was  against  the  West  in  particular,  the  notes  of  the 
branches  were  rapidly  carried  off  to  be  presented  at  the 
northern  offices,  which  were  ill  prepared  to  redeem 
them.  As  the  influx  of  these  bills  was  so  sudden  and 

o  Finance,  3:321. 


221 


Na  ti  on  a  l  M  on  et  ary  Commission 


of  such  magnitude,  it  was  impossible  to  estimate  at 
any  time  the  amount  or  to  comprehend  the  extent 
and  direction  of  the  circulation  of  the  notes. a  Under 
such  a  system  the  bank  was  left  to  “vacillate  be¬ 
tween  the  hazards  of  rashness  and  the  fruitless  results 
of  a  torpid  prudence.”  Often  the  northern  offices  which 
received  the  notes  had  to  wait  a  turn  in  exchange  before 
they  could  be  reimbursed,  and  frequently  had  to  curtail 
their  discounts  in  order  to  provide  means  for  redemp¬ 
tion.  b  Even  without  instructions,  the  Boston  office,  to 
save  itself  from  failure,  early  in  1818,  declined  to  re¬ 
ceive  the  bills  of  southern  branches. a  Moreover,  the 
payment  of  these  southern  and  western  discounts  when 
they  fell  due  was  generally  made  in  the  notes  of  local 
banks  which  thus  became  heavily  indebted  to  the 
branch  office.  The  bank  aggravated  the  difficulty  by 
not  instructing  the  branches  to  demand  settlements  in 
specie  with  the  local  banks  promptly.  Targe  balances 
were  allowed  to  accumulate  until  the  local  institutions 
became  involved  in  an  indebtedness  which  they  in 
turn  could  not  liquidate  without  inflicting  hardship 
upon  their  own  debtors.  c 

The  most  that  can  be  said  in  defense  of  the  bank’s  policy 
is  that  indiscriminate  redemption  aided  in  the  resumption 
of  specie  payments  by  forcing  the  state  banks  to  improve 
the  standing  of  their  own  bills;  that  it  created  an  accept¬ 
able  currency,  coextensive  with  the  limits  of  the  Union;  d 

“Finance,  3:325.  c  Ibid.,  3:307. 

6  Ibid.,  3:589.  Ibid.,  3:590. 


222 


Th  e  Secon  d  u  nit  ed  St  at  es  Bank 


and  that  it  “invigorated  and  confirmed  public  confi¬ 
dence  and  facilitated  commercial  intercourse.”  a  If  this 
defense  be  accepted,  it  makes  the  bank  a  martyr  in 
behalf  of  the  general  welfare  of  the  country.  Local 
bank-note  circulation  decreased  from  1816  to  1819. 
Whether  this  was  due  to  the  operations  of  the  bank 
or  to  the  general  contraction  due  to  resumption  it  is 
difficult  to  tell,  but  for  the  disturbance  and  suffering 
caused  by  this  contraction  the  bank  was  generally 
blamed.  It  thus  had  to  accept  the  censure  for  revo¬ 
lutionary  changes  for  which  it  primarily  was  in  no  way 
responsible. 

From  a  financial  standpoint  the  policy  of  the  bank  was 
so  obviously  illogical  that  little  is  to  be  gained  for  pres¬ 
ent  instruction  through  the  presentation  of  any  detailed 
account  of  the  complications  in  which  it  soon  found  itself 
involved.  In  1818  the  system  broke  down,  and  on  August 
26  the  bank  resolved  that  no  branch  should  take  the 
notes  of  other  branches  except  in  payments  due  to  the 
United  States.6  It  was  found  impossible  to  provide 
for  the  indiscriminate  redemption  of  the  bills  at  nine¬ 
teen  distinct  places,  embracing  the  extremes  of  the 
Union.0  The  bank  had  ample  justification  for  this 
action;  the  twelfth  section  of  its  charter,  which  defined 
the  nature  and  obligatory  effect  of  the  current  notes, 
was  a  verbatim  copy  of  the  thirteenth  section  of  the 
charter  of  the  First  United  States  Bank.  The  old 
bank  did  not  pay  or  receive  on  deposit  the  notes  of  its 

a  Finance,  3:325.  b  Ibid.,  3.326.  c  Jones,  Ibid.,  3:324. 


223 


N  at  i on  a l  M  o  n  e  t  a  r  y  Commission 


branches,  nor  did  these  pay  or  receive  on  deposit  the 
notes  of  the  parent  bank  or  of  each  other,  unless  the 
state  of  exchange  rendered  it  possible. a  The  first  bank 
bill  which  had  received  the  attention  of  Congress  during 
the  discussion  of  1814-1816  contained  a  clause  which  ex¬ 
plicitly  provided  that  the  bank  and  all  its  branches  should 
pay  the  notes  of  each  other,  but  this  requirement  was 
not  inserted  in  the  charter  as  it  was  finally  enacted;* 6 
and  Jones,  the  president  of  the  bank,  afterwards  stated 
that  the  practice  of  making  branch  notes  universally 
redeemable  was  never  intended  to  be  permanent.  It  had 
been  introduced  in  the  West  because  that  part  of  the 
country  was  indebted  to  the  Atlantic  cities  and  had  no 
other  form  of  currency  which  it  could  send.c 

The  restrictions  of  August  28,  1818,  had  some  effect  and 
the  circulation  was  reduced  from  $9,045,000  in  July  to 
$7,286,000  in  November  of  the  same  year.  But  this  was 
not  sufficient.  When  Cheves  took  office  in  March,  1819, 
the  southern  and  western  offices  were  issuing  notes  “most 
profusely.”  The  offices  were  now  ordered  not  to  issue 
notes  when  exchange  was  against  them  A  In  October, 
new  regulations  were  issued.  It  was  ordered  that  the 
branches  could  reissue  the  notes  of  the  parent  bank 
and  each  other  only  when  they  were  creditors,  and  then 
only  when  it  appeared  from  the  state  of  the  exchanges 
that  it  was  manifestly  for  the  interest  of  the  bank.  When 

a  Finance,  4:807. 

&  Lowndes,  Annals  of  Congress,  15  Cong.,  2d  sess.,  1 :330. 
c Origin,  etc.,  by  a  Friendly  Monitor,  1819. 
d Cheves’  Exposition,  Goddard’s  Edition,  115;  Finance,  4:903. 


224 


The  S  e  con  d  u  nit  ed  States  Bank 


the  notes  of  an  office  above  $5  were  drawn  from  it  to  be 
used  as  a  substitute  for  exchange,  further  issue  of  such 
notes  should  forthwith  cease,  unless  their  issue  was  neces¬ 
sary  to  sustain  the  credit  of  the  office.®  These  orders 
were  mitigated  by  the  welcome  notice  that  the  bank 
would  receive  at  any  office  notes  for  $5  issued  at  any 
other  branch.  Cheves  also  endeavored  to  secure  conces¬ 
sions  from  the  Treasury,  and  urged  that  the  exception 
made  in  favor  of  payments  due  to  the  Government,  by 
the  indiscriminate  use  of  branch  notes,  be  abandoned. & 
Crawford,  Secretary  of  the  Treasury,  was  therefore  asked 
to  give  his  approval  to  the  rejection  of  foreign  notes  in 
the  payment  of  dues.c  He  declined, d  but  in  Decem¬ 
ber,  1820,  he  admitted  the  embarrassments  under  which 
the  bank  labored,  and  suggested  that  the  charter  of  the 
bank  be  amended  so  as  to  make  the  bills  of  all  the 
offices  of  the  bank  “except  that  at  the  seat  of  govern- 
ment,  receivable  only  in  the  States  where  they  are 
made  payable  and  in  the  States  and  Territories  where 
no  office  is  established.  The  effect  of  this  modifica¬ 
tion  would  be  to  make  the  notes  of  the  offices  of  the 
Bank  of  the  United  States,  except  the  office  in  this  dis¬ 
trict,  a  local  currency  which  will  enter  and  continue  in  the 
local  circulation  of  the  States  in  which  they  are  issued.”  e 
Cheves  also  /  turned  to  Congress,  complaining  that  under 
the  existing  regulations  the  circulation  of  the  bank  was 

“Oct.  5,  1819;  Finance,  4:908.  ^See  Exposition,  pp.  59,  et  seq. 

b  Catterall,  74.  e  Finance,  3 : 552. 

c April  6,  1818;  Finance,  4:874.  /  Jan.  12,  1821;  Ibid.,  3:587. 


7069 — 1 


i5 


225 


National  Monetary  Commission 


limited  to  those  places  where  it  was  least  wanted,  and 
asked  for  reliefs 

Neither  Crawford’s  recommendation  nor  Cheves’s  appeal 
were  successful,  and  the  bank  again  had  to  make  its 
adjustment  as  best  it  could.  When  the  bank  imposed  its 
new  set  of  restrictions  upon  the  branches  in  October, 
1819,  it  agreed  to  increase  the  issue  of  $5  notes. b  In  this 
way  a  place  could  be  made  for  at  least  a  small  volume  of 
notes  of  the  bank  in  the  West  which  would  otherwise  be 
deprived  of  all  circulation,  and  it  also  provided  a  universal 
currency  in  small  denominations.  The  difficulty,  how¬ 
ever,  was  that  the  president  and  cashier  did  not  have  time 
to  sign  any  large  number  of  these  notes.0  As  early  as  Jan¬ 
uary  13, 1818,  the  bank  had  petitioned  for  an  amendment 
to  its  charter  to  relieve  the  officers  named  from  signing 
the  notes,  and  a  bill  of  relief  was  passed  by  the  Senate,  but 
postponed  in  the  House.  In  1820  another  application  was 
made  and  again  the  Senate  voted  favorably,  but  no  action 
was  taken  by  the  House.  In  1822  the  same  procedure 
was  repeated.  In  1823  a  House  committee  reported  in 
favor  of  relieving  the  president  and  cashier  of  the  exhaust¬ 
ing  manual  labor  in  signing  notes  which  disqualified  them 
from  applying  their  minds  to  the  more  critical  and  impor¬ 
tant  concerns  of  the  bank,  but  Congress  delayed  action. 
In  1826  the  bank  again  renewed  its  petition  and  Con¬ 
gress  with  its  usual  procrastination  neglected  to  legislate. 
These  successive  failures  led  the  bank  to  invent  the  use  of 
branch  drafts. d 

a  Niles,  19:245.  clbid.,  3:589. 

&  Finance,  4:908.  rfH.  R.  No  42,  23d  Cong.,  2d  sess.,  pp.  5-6. 


226 


The  S  econ  d  u  nit  ed  St  at  es  Bank 


There  were  three  ways  by  which  the  bank  could  control 
or  partially  control  its  circulation  and  protect  its  reputa¬ 
tion:  Eir&tju  by  providing  a  specie  reserve;  second,  by 
requiring  prompt  settlements  with  state  banks ;  and  third, 
by  contracting  its  issues.  Cheves  chose  the  latter  course. 
In  January,  1820,  the  circulation  stood  at  $3,600,000  as 
against  $8,300,000  in  1818.  As  a  result  of  this  policy  but 
few  of  the  notes  of  the  bank  circulated  in  the  South  and 
West.®  This  policy  created  much  dissatisfaction:  the 
bank  was  accused  of  creating  an  unnecessary  scarcity  of 
money ;  it  denied  the  people  an  equalization  of  exchange ; 
it  left  the  currency  at  the  mercy  of  local  banks,  nearly 
all  of  whose  bills  were  at  a  discount  except  at  the  place 
where  they  were  issued. ^ 

Riddle*  who  became  president  in  1825,  changed  this 
policy.  He  believed  that  notes  might  safely  be  issued 
notwithstanding  the  necessity  of  paying  them  everywhere 
on  government  account,  provided  the  bank  could  put  an 
end  to  the  depreciation  of  state  bank  notes.  He  there¬ 
fore  insisted  upon  constant  settlement  of  state  bank  bal¬ 
ances  and  on  the  issue  of  the  bank’s  own  notes  instead  of 
paying  out  those  of  state  banks.  The  latter  were  with¬ 
held  and  forced  upon  the  state  banks  for  redemption.0 
The  note  circulation  consequently  increased.  In  1825  it 
amounted  to  $6,740,000  and  in  1828  to  $9,856,000.  At 
Philadelphia  the  notes  of  all  branches  were  indiscrimi- 

°Finance,  3: 552. 

6 Niles,  June  26,  1819;  16:290;  17:2;  18:274. 

c  Report  of  Triennial  Meeting  of  Bank  of  the  United  States  in  1828, 
Niles,  35:72. 


227 


N  at  ion  a  l  M  on  et  ary  Commission 


nately  taken.  The  following  table  shows  the  circulation 
of  the  bank  in  1817-1836: 


1817 

1818 

1819 

1820 

1821 

1822 

1823 
1824. 

1825 

1826 

1827 

1828 

1829 

1830 

1831 

1832 

1833 

1834 

1835 

1836 


$1, 900, 000 

8,  300,  000 
6,  6oo,  000 

3,  600,  000 

4,  600,  000 

5 ,  600,  000 
4,  300,  000 
4,  600,  000 

6,  000,  000 

9,  500,  000 

8,  500,  000 

9,  900,  000 

1 1 ,  900,  000 

12,  900,  000 

16,  200,  000 
2 1 ,  300,  000 

17,  500,  000 
19,  200,  000 
17,  300,  000 
23,  000,  000 


As  the  bank  was  unable  to  secure  legislative  relief,  in 
order  to  put  out  a  small  note  circulation  it  resorted  to 
indirect  methods  and  accomplished  its  end  by  the  inven¬ 
tion  .of.  bank  drafts  in  1827/*  Able  legal  advisers  of  the 
bank  declared  that  since  the  issue  of  checks  upon  the  bank 
by  its  branches  was  an  original  banking  operation  the  pro¬ 
posed  use  was  legal  whether  the  checks  were  for  small 
sums  or  more,  signed  by  one  officer  or  more,  with  or  with¬ 
out  the  external  appearance  of  a  bank  note.  The  bank 
authorized  the  issue  of  $5  and  $10  drafts,  signed  by  the 
branch  president  and  cashier,  drawn  upon  the  principal 
cashier  at  Philadelphia,  and  transmitted  to  the  offices, 
which  resembled  bank  notes  so  closely  that  after  a  short 


oCatterall,  117. 


228 


Th  e  Secon  d  U  nit  ed  States  Bank 


time  but  few  could  detect  the  difference.®  In  form,  the 
branch  draft  read  as  follows: 


Cashier  of  the  Bank  of  the  United  States: 

Pay  to  Jas.  L.  Smith,  or  order,  five  dollars. 

Office  of  discount  and  deposit  in  Utica. 

The  3d  day  of  September,  1831. 

John  B.  Leving,  President. 

N.  V.  Grazier,  Cashier. 


This  was  then  indorsed:  “Pay  to  the  bearer,  Jas.  L. 
Smith.”  Twenty-dollar  notes  were  added  in  1831.  The 
Government  accepted  them  as  notes.  Catterall  states  that 
technically  the  drafts  differed  from  notes  in  the  following 
particulars : 

1 .  They  were  not  signed  by  the  president  and  cashier  of 
the  parent  bank. 

2.  They  were  not  drawn  in  the  name  of  a  corporation. 

3.  They  were  not  subject  to  the  supervision  of  the  Sec¬ 
retary  of  the  Treasury. 

4.  They  were  not  legally  receivable  in  payment  of  public 
dues. 

5.  They  were  not  payable  where  issued. 

6.  They  were  not  suable  at  the  issuing  branch. 

7.  They  were  not  limited  to  the  denominations  of  $5  or 
above. b 

Seventeen  of  the  branches  issued  these  drafts,  and  in 
1832  four-fifths  were  put  out  at  eight  offices,  two  in  the 
South  and  six  in  the  West  and  Southwest.  In  that  year 
the  proportion  of  drafts  to  the  total  circulation  was  less 

,  Catterall,  117.  &Ibid.,  123. 


229 


N  at i o n a  l  M  onetary  Commission 


than  one-fourth,  and  at  Pittsburg,  Lexington,  and  Louis¬ 
ville  the  volume  of  drafts  was  greater  than  that  of  notes.® 

Practically  these  drafts  became  a  part  of  the  circulation, 
and  in  any  complete  study  of  circulation  ought  to  be 
included. 

SAIyE  OF  DRAFTS. 

At  the  time  the  bank  began  its  operations  the  commer¬ 
cial  world  was  not  in  agreement  as  to  whether  it  should 
sell  drafts.  Some  thought  that  the  new  bank  should  be 
called  upon  to  sell  checks  only  when  it  was  convenient  and 
then  only  at  par,  for  even  if  it  sacrificed  a  premium  which 
might  be  exacted  it  would  receive  its  compensation  in  the 
increased  confidence  and  support  of  the  commercial  com¬ 
munity.  On  the  other  hand,  it  was  contended  that  a  sys¬ 
tem  of  gratuitous  drafts  would  lead  to  favoritism. 6  The 
practice  involved  a  still  larger  question,  namely,  the  estab¬ 
lishment  of  a  universal  medium  of  exchange.  Secretary 
Crawford,  in  July,  1817,  upon  learning  that  the  bank  in¬ 
tended  to  make  charges  on  domestic  exchange,  vigorously 
objected.  One  of  the  objects  of  the  bank,  he  declared,  was 
to  do  away  with  inequalities  in  rates  of  exchange  which  had 
formerly  existed  between  the  different  sections  of  the  coun¬ 
try  and  to  put  an  end  to  the  system  of  brokerage  which 
had  imposed  unnatural  and  arbitrary  rates  which  were  not 
based  upon  the  actual  balance  of  trade  existing  between 
different  sections.  In  his  opinion,  the  exaction  of  one- 
fourth  or  one-half  of  1  per  cent  on  checks  drawn  on  one 
office  by  another  “without  reference  to  the  commercial 
relations  which  exist  between  the  two  places  by  a  cap- 

oCatterall,  129.  6  Finance,  3: 309. 


230 


The  S  econ  d  u  nit  ed  States  Bank 


italist  who  always  sells  and  never  buys,  will  as  effectually 
convince  the  community  of  the  prostration  of  its  rights 
and  interests  at  the  will  of  the  bank  as  the  exaction  of 
io  per  cent.”a  He  warned  the  bank  against  arousing 
hostility  which  might  prevent  the  renewal  of  its  charter, 
and  served  notice  that  if  any  obstacles  were  placed 
in  the  way  of  “universality”  the  treasury  would  have 
to  take  steps  to  save  the  community  from  the  cupidity 
of  the  bank.  Although  Crawford  may  have  fairly  in¬ 
terpreted  the  ill-defined  anticipations  of  the  public  in 
regard  to  the  advantages  to  be  derived  by  the  establish¬ 
ment  of  a  bank  and  may  have  accurately  measured  the 
opprobrium  which  would  attach  to  the  bank  if  it  should 
charge  for  drafts,  it  was  clear  that  he  confused  the  oper¬ 
ation  of  domestic  exchange  caused  by  commercial  factors 
and  the  exchange  of  currencies  of  banks  at  par.  As 
Catterall  points  out,  the  phrase  “equalization  of 
exchange”  was  used  in  three  senses:  First,  in  that  of 
putting  an  end  to  the  depreciation  of  state  bank  notes; 
second,  in  that  of  real  exchange;  third,  in  that  of  putting 
an  end  to  the  discount  of  bank  notes,  which  was  due  to 
their  being  at  a  distance  from  the  place  of  issue  and  redemp¬ 
tion.  “This  confusion  of  use  led  people  to  believe  that 
the  bank  ought  not  to  charge  for  making  exchanges 
for  the  public.”6  Moreover,  it  was  possible  here  as  in 
state  banking,  in  the  sale  of  a  draft,  to  make  a  charge 
whereby  more  than  the  legal  6  per  cent  interest  could  be 
obtained.  For  illustration  of  the  confusion  of  thought 
on  the  subject  of  exchange  abundant  evidence  may  be 

“Finance,  4:540.  ^Catterall,  137-138. 


231 


N  at i o n a  l  M  on  et  ar  y  Commission 


found  in  Niles  Register.  When  the  cashier  of  the  bank  at 
Philadelphia,  in  1818,  gave  notification  that  the  notes  of 
the  bank  of  the  United  States  which  were  made  payable 
at  its  several  branches  would  not  be  received  except  in 
payment  of  debts  due  to  the  United  States  Bank,  Niles 
denounced  the  action  because  it  destroyed  the  equaliza¬ 
tion  of  exchange ;  as  the  facilities  of  remittances  were  thus 
destroyed  the  discount  paid  on  good  bank  bills  must  be 
advanced;  and  again,  when  the  parent  bank,  in  1823, 
agreed  to  receive  and  deposit  the  notes  of  certain  banks 
in  the  vicinity,  Niles  demanded  that  this  accommodation 
should  be  extended  to  other  places.® 

Jones,  president  of  the  bank,  July  20,  1817,  in  his  reply 
to  Crawford,  denied  that  the  bank  was  under  any  legal 
obligation  to  furnish  a  national  currency,  nor  did  Con¬ 
gress  in  granting  a  charter  require  this.  During  the 
existence  of  the  old  bank  no  one  imagined  that  it  was 
bound  to  transmit  the  money  of  individuals  from  place 
to  place  without  premium  or  compensation.  Crawford’s 
interpretation  of  the  obligation  to  provide  an  absolute 
equality  of  exchange  throughout  the  Union  was  the  first 
intimation  he  had  received  of  any  such  expectation  on  the 
part  of  the  public.* 6  It  was  also  claimed  in  defense  of  the 
bank  that  as  there  was  a  provision  in  the  charter  that  the 
bank  should  not  charge  the  Government  anything  for 
difference  of  exchange,  it  was  expected  that  charges  would 
be  made  in  the  case  of  private  individuals.0 

a  Niles,  23:  322. 

&  Finance,  4:  809. 

c Lowndes,  Annals  of  Congress,  15th  Cong.,  2  sess.,  1:330. 


232 


The  S  econd  United  States  Bank ■ 


It  is  possible  that  the  bank  would  have  escaped  some 
of  the  criticism  if  it  had  followed  more  uniform  rules. 
The  investigating  committee,  which  reported  in  January, 
1819,  stated  that  drafts  had  been  sold  by  the  Philadelphia 
office  on  Charleston,  New  Orleans,  and  Savannah,  within 
a  few  days  of  each  other  at  very  different  rates,  varying 
from  1  to  5  per  cent  on  the  same  office.  Without  ex¬ 
pressing  a  definite  opinion  as  to  the  policy  of  such 
charges,  it  thought  that  if  drafts  were  sold  they  should 
be  delivered  at  fixed  and  permanent  prices,  not  exceeding 
the  expense  of  transportation  of  specie.  Niles  noted  that 
at  some  of  the  offices  premiums  were  charged  for  drafts; 
at  others,  the  accommodation  of  drafts  was  refused;  “  that 
is,  the  equalization  of  exchange  is  denied  to  any  except  those 
who  keep  their  accounts  exclusively  with  such  offices.  ’  ’ a  In 
August,  1818,  the  bank  found  it  necessary  to  restrict  this 
business  and  forbade  the  branches  to  draw  on  each  other  or 
the  parent  bank  unless  a  premium  “  equivalent  at  least  to 
the  expense,  risk,  and  loss  of  time  incurred  in  transmit¬ 
ting  specie”  was  allowed.*  &  Under  the  reform  adminis¬ 
tration  of  Ch'eves,  the  officers  were  ordered  not  to  draw 
on  each  other,  except  on  funds  provided  in  advance  to 
meet  payments  of  drafts,  unless  there  was  some  definite  pre¬ 
vious  understanding. c  In  the  course  of  time  the  selling  of 
drafts  constituted  a  considerable  part  of  the  bank’s  business. 
In  1829  such  transactions  amounted  to  $24,384,000. d 

a Niles,  Feb.  28,  1818;  14:  4 

&  Finance,  3:  326. 
c Ibid.,  4:  908. 

^Gallatin’s  Writings,  3:  344;  in  1832  it  amounted  to  $45,157,000;  S. 
Doc.  No.  17,  23d  Cong.,  2d  sess.,  p.  no. 


233 


National 


M  on  et  ar  y  Co 


mm  is  s  i  on 


Rates,  as  a  rule,  were  low,  ranging  from  par  to  i  yi  per  cent, 
the  most  common  being  one-half  of  i  per  cent.0  The 
best  financial  opinion  also  justified  the  making  of  charges 
on  such  instruments ;  Gallatin  gave  it  his  commendation  b 
as  well  as  Tucker. c  It  was  recognized  that  the  bank  must 
“on  occasions  of  unusual  disturbances,  in  the  course  of 
trade,  be  compelled  to  transmit  specie  from  place  to  place,” 
and  it  was  just  that  the  bank  should  be  comoensated  for 
performing  this  office. 

EXCHANGE. 

The  buying  of  bills  of  exchange  by  the  bank,  like  the 
sale  of  drafts,  was  in  the  early  years  of  its  operations  re¬ 
garded  with  suspicion.  Crawford’s  objections  to  exchange 
operations  as  a  whole  have  been  noted. d  Though  it  is 
probable  that  this  criticism  at  that  time  was  directed  more 
against  the  sale  of  drafts  than  the  purchase  of  bills,  all  opera¬ 
tions  in  exchange  were  viewed  with  disfavor.  Up  to 
this  period  it  was  the  practice  of  banks  to  discount 
notes  payable  on  the  spot,  and  if  for  accommodation  they 
discounted  a  bill  payable  at  a  distance  it  was  done  on 
the  same  terms,  no  profit  in  the  way  of  exchange  being 
expected. e 

There  were  two  possible  evils  in  the  practice  of  charging 
for  exchange:  First,  the  opportunity  of  fixing  an  exces¬ 
sive  rate,  which  would  practically  make  the  discount  on 

“Catterall,  142;  Appendix,  VII,  p.  505. 

&  Writings,  3:  345-346. 

c  Theory  of  Money  and  Banks  Investigated,  301. 

<*July,  181  7;  Finance,  4:  540. 

«Raguet,  Currency  and  Banking,  114-121;  Summer,  History  of  Bank¬ 
ing,  185. 


234 


The  S  econ  d  u  nit  ed  States  Bank 

\ 

usurious  terms;  and,  second,  it  gave  possibilities  of  ex¬ 
panding  and  contracting  the  circulation  through  the 
purchase  or  refusal  to  purchase  such  bills.  During  the 
period  of  maladministration  under  Jones’  presidency, 
bills  of  exchange  were  dealt  in  which  were  not  founded 
upon  true  commercial  transactions.  “Race  horse”  bills 
were  common;  that  is,  the  payment  of  one  bill  of  exchange 
was  made  by  the  purchase  of  a  new  one,  which  might  or 
might  not  be  based  upon  a  real  transaction.®  Although 
in  the  first  few  years  the  dealings  in  exchange  were  incon¬ 
siderable,  Cheves,  in  enforcing  his  policy  of  contraction, 
found  it  necessary  to  impose  stricter  regulations  and  or¬ 
dered  the  office  not  to  buy  exchange  at  longer  periods 
than  sixty  days  sight,  nor  to  buy  at  more  than  the  cur¬ 
rent  rates,  and  in  no  case  above  par. 6  In  June,  1819,  the 
bank  did  not  own  a  single  dollar  of  domestic  bills.0 

Biddle  undertook  a  development  of  this  form  of  busi¬ 
ness.  By  1825,  when  he  became  president,  internal  com¬ 
merce  had  been  established  on  a  much  sounder  basis; 
state  bank  notes  were  also  in  better  repute,  and  there  was 
not  the  popular  misunderstanding  which  had  been  pro¬ 
voked  in  the  earlier  controversies  over  the  bank’s  duty 
to  “equalize”  exchange. 

Up  to  1820  there  is  no  separate  statement  in  the  bank 
returns  as  to  investments  in  bills  of  exchange.  In  that 
year,  in  the  annual  balance  sheet,  the  amount  was  $1,500,- 
000,  and,  as  will  be  noted  in  the  following  table,  the 

aCatterall,  158. 

b  Finance,  4:  808. 

cH.  R.  No.  460,  22dCong.,  1st  sess.,  p.  312. 


235 


National  M  on  et  a  r  y  Commission 


amounts  did  not  increase  very  much  until  1823.  Invest¬ 
ments  in  bills  of  exchange,  as  shown  in  the  annual  balance 
sheets  of  the  bank,  from  1820  to  1836  were  as  follows: 


1820  _ $1,500,000 

1821  _  1,500,000 

1822  _  1,600,000 

1823  _  1,900,000 

1824  _  2, 300, 000 

1825  _  2,700,000 

1826  _  3,100,000 

1827  _  3,300,000 

1828  _  5,000,000 

1829  _  7,700,000 

1830  _  8,700,000 

1831  _  10,500,000 

1832  _  16,700,000 

1833  _  18,100,000 

1834  _  16,^00,000 

1835  _  17,200,000 

1836  _  19,300,000 


It  will  be  observed  that  these  investments  at  the  date  of 
the  annual  return  selected  in  the  foregoing  table  gradually 
increased  under  Biddle’s  administration  until,  in  1831,  it 
amounted  to  $10,500,000.  The  next  year  there  was  an 
increase  of  more  than  50  per  cent,  a  gain  which  was  sub¬ 
sequently  held.  There  are  no  returns  which  will  show  the 
total  volume  of  the  dealings  in  exchange  by  years  for  the 
whole  period.  In  1823  the  total  purchases  were  $7,353,- 
ooo;a  from  July,  1827,  to  July,  1828,  they  were  reported 
at  $22,000,000; h  and  in  the  year  ending  June  30,  1831,  the 
bank  purchased  $44,000,000. 


aSen.  Doc.  No.  17,  23d  Cong  ,  2d  sess.,  p.  25. 

&  Report  of  the  Committee  of  Stockholders,  Sept.  21,  1828,  published  in 
Niles,  35:74. 


236 


The  S  econ  d  u  nite  d  St  ates  Bank 


Great  pride  in  the  development  of  this  business  was 
taken  by  the  management  in  later  years.  It  was  claimed 
that  not  only  was  the  capital  of  the  several  branches  kept 
more  stable,®  but  commerce  was  benefited.  Biddle  de¬ 
clared  that,  next  to  the  preservation  of  the  currency,  the 
most  important  service  the  bank  could  render  was  to  fa¬ 
cilitate  the  internal  exchanges:  Its  object  was  to  melt 
down  into  one  uniform  and  healthy  mass  all  the  depre¬ 
ciated  currencies  with  which  some  parts  of  the  country 
were  afflicted,  thus  bringing  down  exchanges  to  the  least 
cost.  The  branches  in  the  South  and  West  were  encour¬ 
aged  to  purchase  bills  instead  of  discounting  on  personal 
security.  The  cashier  of  the  mother  bank,  in  advising 
the  branch  at  Cincinnati,  declared  that  the  business  of 
discounting  local  paper  was  peculiarly  the  business  of  the 
local  state  banks,  while  exchange  business  properly  be¬ 
longed  to  the  branch. b  The  proceeds  from  these  bills  pro¬ 
vided  a  fund  for  the  redemption  of  notes  issued  in  the 
southern  and  western  offices,  and  thus  made  it  possible  to 
make  larger  loans  in  those  sections  without  running  the  risk 
of  transferring  capital  to  that  section  from  the  North  and 
East.  At  this  time  trade  with  New  Orleans  in  the  West 
and  Southwest  was  increasing.  A  large  amount  of  prod¬ 
uce  was  sent  to  that  city  and  bills  were  drawn  on  the 
proceeds  which  were  purchased  by  the  several  branches 
and  remitted  to  the  branch  at  New  Orleans.  Large  funds, 
therefore,  accumulated  at  New  Orleans.  When  the  notes 

oCatterall,  p.  98. 

&H.  R.  No.  121,  22d  Cong.,  2d  sess.,  p.  148;  see  also  H.  R.  No.  460,  22d 
Cong.,  1  st  sess.,  p.  517. 


237 


National  Monetary  Commission 


of  the  western  branches  which  were  issued  in  the  course 
of  trade  found  their  way  to  the  East,  in  the  purchase  of 
eastern  products,  they  were  met  in  turn  by  drafts  on  the 
funds  accumulated  at  the  branch  at  New  Orleans.  These 
drafts  were  always  available  because  of  the  purchases 
made  in  New  Orleans  on  account  of  the  northern  mer¬ 
chants  or  manufacturers.® 

It  is  undoubtedly  true  that  one  of  the  chief  services  of 
the  bank  to  the  commercial  world  lay  in  its  ability  to  fur¬ 
nish  exchange  at  low  and  fairly  uniform  rates.  Its  con¬ 
nections  were  widely  extended  and  its  resources  ample. 
And  yet  most  contradictory  statements  were  made  in  re¬ 
gard  to  the  usefulness  of  the  bank  in  undertaking  this 
work.  Some  claimed  that  if  it  were  not  for  the  bank  and 
its  dealings  in  exchange  planters  and  the  agricultural  in¬ 
terests  in  the  South  and  West  would  be  subject  to  the 
extortionate  rates  of  private  dealers.  It  was  stated  that 
before  the  bank  went  into  operation  exchange  at  Charles¬ 
ton  was  from  8  to  io  per  cent,  either  for  or  against. 
McDuffie,  chairman  of  the  Committee  on  Ways  and 
Means,  in  his  report  of  1830,  went  so  far  as  to  declare  that 
the  bank  actually  furnished  a  circulating  medium  more 
uniform  than  specie.  On  the  other  hand,  because  of  the 
lack  of  a  proper  understanding  of  the  subject  of  exchange, 
it  was  argued  that  the  bank  ought  to  make  no  charge. 
President  Jackson,  in  his  message  of  1829,  declared  that 
the  demand  of  a  small  commission  for  the  transfer  of  funds 
of  individuals  from  one  part  of  the  United  States  to  an- 

«H.  R.  No.  460,  22d  Cong.,  1st  sess.,  p.  316;  Catterall,  p.  406;  Niles, 
29:31-32;  35:74- 


238 


The  S  e  con  d  u  nit  ed  St  at  es  Bank 


other  justified  him  in  stating  that  the  bank  had  “failed 
in  the  great  need  of  establishing  a  uniform  and  sound  cur¬ 
rency.”  Because  the  bills  of  the  mother  bank  were  not 
redeemable  at  New  Orleans  it  was  held  that  they  were  not 
of  equal  value  with  silver  to  the  merchant  who  wished  to 
purchase  cotton  in  the  latter  city,  and  that  consequently 
the  bills  were  depreciated.  It  was  forgotten  that  the 
transportation  of  specie  from  Philadelphia  to  New  Orleans 
could  not  be  made  without  cost.  By  1832,  however,  the 
bank  no  longer  held  its  preeminent  position  in  exchange 
operations.  State  banks  entered  the  field;  in  1834  three 
of  these  institutions  in  the  West  and  Southwest  carried 
on  a  business  in  domestic  exchange  of  nearly  a  million 
dollars  more  than  all  the  seven  branches  of  the  United 
States  Bank  situated  in  that  section  of  the  country.0 
This  was  in  part  due  to  the  necessity  of  contraction  by  the 
bank  caused  by  the  loss  of  the  government  deposits,  but 
it  also  shows  that  the  bank’s  service  in  this  direction 
was  not  indispensable. 

The  bank,  moreover,  was  charged  with  forcing  its  cus¬ 
tomers  to  purchase  bills  on  their  crops  when  they  desired 
to  discount  notes.  By  doing  this  it  would  secure  more 
than  the  legal  rate  of  interest,  for  if  the  borrower  paid  6 
per  cent  on  the  loan  and  1  %  per  cent  on  exchange  he 
would  be  obliged  to  pay  for  a  ninety-day  bill  what 
amounted  to  12  per  cent  per  annum. 

The  rates  of  exchange,  according  to  the  summarized 
statement  made  by  Catterall,  varied  from  par  to  two  and 

a  Sen.  Doc.  No.  13,  23d  Cong.,  2d  sess.,  pp.  13,  63. 


239 


National  Monetary  Commission 


a  half.  The  rates  from  the  East  to  the  West  and  South 
were  higher  than  the  rates  on  the  East  from  those  sec¬ 
tions;  between  the  eastern  offices  the  rate  was  low.  The 
rates  in  the  West  on  their  western  offices  were  high,  in 
order  to  discourage  bills  drawn  on  western  cities,  since  it 
was  considered  more  advantageous  that  bills  should  be 
drawn  on  the  East  or  on  New  Orleans.  The  rates,  there¬ 
fore,  between  the  western  offices  were  almost  as  high  as 
the  rates  on  the  East,  and  sometimes  higher.  Again, 
according  to  Catterall,  who  has  analyzed  the  exchange 
operations  by  sections,  exchange  on  the  Southwest  and 
West  in  1824  amounted  to  $8,890,000,  or  less  than  29  per 
cent  of  the  bank’s  entire  purchases.  In  1827  they  were 
32  per  cent;  in  1829,  46  per  cent;  in  1830,  56  per  cent; 
and  in  1832,  over  60  per  cent. 

In  1824  the  western  dealings  were  not  as  large  as  the 
South,  and  only  a  little  over  half  as  large  as  those  of  the 
North  and  East,  while  in  1832  they  were  in  excess  of 
other  sections.  The  offices  which  did  most  of  the  busi¬ 
ness  were  only  four  or  five.  From  1829-1832,  inclusive, 
the  four  offices  in  New  Orleans,  Nashville,  Louisville,  and 
Lexington  did  four-fifths  of  all  the  exchange  business  in 
the  West  and  Southwest,  during  the  remaining  years  of 
the  history  of  the  bank  three  of  these,  with  the  addition 
of  Mobile  and  Natchez,  did  over  four-fifths.  New  Orleans 
was  the  center.  It  was  the  branch  where  most  bills  were 
purchased  and  on  which  most  offices  drew  the  most  bills.a 
The  profits  of  the  bank  from  this  source  of  business  are 

aCatterall,  143;  H.  R.  No.  460,  226.  Cong.  1st  sess.,  pp.  316-317. 


> 


240 


The  S  econ  d  u  nit  ed  States  Bank 


shown  in  the  following  table;  profits  from  discounts  are 
also  given  for  purposes  of  comparison: 


1818 

1819 

1820 

1821 

1822 

1823 

1824 

1825 

1826 

1827 

1828 

1829 

1830 

1831 

1832 

1833 

1834 


Discounts. 


$1. 152.300 

988. 200 

694. 600 
620, 500 

512. 200 
573. 7oo 

678. 600 

558. 600 
7 1 1 , 100 

721 . 600 

697 . 900 

823 . 200 

876. 600 

889. 900 
1. 254, 300 
x, 234, 500 
i , 074, 100 


Exchange. 


$51, 000 
142 , 200 

106 . 800 
44,900 
32, 500 

49. 800 

67, 400 

78. 800 

107. 400 

101 . 400 

190. 800 
274, 000 
372. 900 
401,500 
584, 300 
676, 100 

605.400 


DISCOUNTS  AND  DOANS. 

Among  the  early  decisions  of  the  directors  was  a  vote, 
January  9,  1817,  that  between  February  20  and  July  1 
of  that  year  sixty-day  loans  would  be  made  to  those  who 
had  bonds  to  pay  on  account  of  revenue  arising  from  im¬ 
ports.®  It  is  impossible  to  determine  the  volume  of  these 
loans,  but  when  the  bank  was  investigated  in  the  latter 
part  of  1818  it  was  reported  that  the  bank  and  its  offices 
had  very  little  good  business  paper  on  hand. 6  As  previ¬ 
ously  noted,  an  excessive  amount  of  the  bank’s  capital  was 
loaned  to  stockholders  on  pledge  of  stock;  and  it  is,  there¬ 
fore,  presumable  that  loans  to  merchants  formed  but  a 
small  part  of  the  discounts.  The  bank  thus  placed  beyond 

“Finance,  3:  342.  &  Ibid.,  3:  312. 


7069 — 16 


16 


241 


National  Monetary  Commission 


its  reach  a  large  part  of  its  resources,  and  when  in  July ,  1 8 1 8, 
it  became  necessary  to  curtail  discounts  the  reduction,  in 
almost  all  cases,  fell  on  business  paper.  Nor  is  it  possible 
to  present  very  much  information  in  regard  to  the  details 
of  the  discount  business  in  subsequent  years.  During  the 
earlier  years  of  Jones’s  administration,  when  the  branches 
were  encouraged  to  discount  heavily,  large  loans  were  made 
on  security  which  in  the  last  analysis  was  real  estate.  As 
a  result  of  this  ill-advised  policy  there  was  a  considerable 
volume  of  suspended  debt  in  the  South  and  West  and  a  large 
amount  of  real  estate  was  thrown  back  upon  the  bank. 
The  total  amount  of  doubtful  indebtedness  in  1822 
amounted  to  over  $10,000,000,  including  that  lost  by  the 
Baltimore  branch,  due  to  speculation  of  its  officers.0  The 
suspended  debt  at  the  Cincinnati  office  alone  amounted  to 
$2,528,000.  Here,  in  particular,  it  was  necessary  to  take 
real  estate.  When  the  loan  was  secured  by  mortgage  and 
interest  was  regularly  paid  the  debtor  was  not  disturbed. 
■  If  the  security  was  insufficient,  the  mortgage  was  foreclosed 
and  the  property  sold,  usually  to  be  purchased  by  the  bank 
and  then  improved. h 

Biddle  undertook  to  exercise  stricter  regulations,  and 
ordered  that  discounts  should  be  made  for  short  dates 
and  only  on  good  commercial  paper;  loans  on  real  estate 
and  stock  security  were  forbidden.  In  1824  the  New  York 
office  was  instructed  to  loan  only  at  sixty  and  ninety  days, 

0  Report  of  Stockholders,  Oct.  1,  1822,  in  Niles,  3:  87. 

&H.  R.  No.  460,  2 2d  Cong.,  1st  sess.,  p.  523;  Executive  Doc.  No.  118, 
24th  Cong.,  2d  sess.,  pp.  114-115;  Catterall,  400. 


242 


The  Second  United  States  Bank 


though  it  might  increase  the  term  to  four  months,  if  the 
loan  was  “beyond  all  exception  and  for  a  good  cus¬ 
tomer.”®  When  asked  by  the  president  of  the  New 

York  office  to  permit  longer  discounts  in  the  interest  of 

1  * 

larger  profits,  Biddle  replied:  “.Let  us  not,  by  the  hope 
of  doing  better  or  getting  more  business,  risk  the  prop¬ 
erty  and  safety  of  the  institution;”  and  to  the  directors 
of  the  Baltimore  office  he  wrote  in  like  spirit:  “Our 
great  object  is  business  men  and  business  paper.”0 
The  wisdom  of  this  policy  was  seen  during  the  crisis  of 
182.5,  when  the  bank  was  able  to  loan  freely.  During 
the  spring  of  1827,  owing  to  the  ease  in  the  money 
market,  Biddle  relaxed  the  regulations  for  a  short  pe¬ 
riod,  officers— being  allowed  to  discount  on  six  months’ 
paper.  Large  sums  were  consequently  loaned  on  accom¬ 
modation  notes,  and  renewals  became  more  common/ 
For  this  liberality  the  bank  had  to  pay  the  penalty, 
for  during  the  pressure  of  1828  it  was  obliged  to  refuse 
assistance  to  merchants. c 

After  1827  .  the  West  and  Southwest  received  still 
more  generous  treatment.  The  rapid  payment  of  the 
public- debt  deprived  the  bank  of  investments  in  gov¬ 
ernment-  securities,  and  the  development  of  the  cotton 
industry  invited  an  extension  of  credit.  In  1828  the 
bank’s  discounts  and  bills  of  exchange  in  the  West 
and  Southwest  amounted  to  $13,700,000  out  of  a  total 
of  $39 >3 50,000;  in  1832,  the  respective  figures  were 

“Catterall,  100.  6  Ibid.,  109,  390.  cIbid.,  no. 


243 


N  at  i  on  a  l  M  o  n  et  a  r  y  Commission 


$36,400,000  and  $70,400,000.  The  proportion  of  about 
one-third  arose  to  one-half. a  That  the  loaning  policy  of 
the  United  States  Bank  did  not  differ  from  that  of  local 
institutions  was  seen  in  1831  and  1832.  Its  experience 
at  that  time  is  thus  described  by  Catterall:  In  the  West 
and  Southwest  “money  was  advanced  to  grow  the  crops, 
and  the  loan  paid  out  of  the  proceeds  when  they  came 
to  market.  The  bills  of  exchange  by  which  these  loans 
were  made  were  frequently  six  months’  paper.  *  *  * 

In  1831  and  1832  the  crop  was  short.  When  to  this 
was  added  importations  and  disturbances  arising  from 
a  visitation  of  the  cholera  it  will  be  readily  supposed 
that  the  bank  could  not  get  its  debts  paid  when  they 
fell  due.  Nor  could  it  secure  foreign  bills  to  send 
abroad  in  order  to  check  specie  drains,  since  foreign 
bills  were  drawn  for  the  most  part  upon  the  cotton 
crop.’’5  Although  the  management  of  the  parent  bank 
at  Philadelphia  again  and  again  counseled  the  west¬ 
ern  and  southern  branches  to  adopt  more  conserva¬ 
tive  methods,  the  advice  was  not  heeded.  Indeed,  the 
branch  officers  defended  their  operations  as  wise  and 
necessary.  The  central  bank,  however,  must  be  held  ulti¬ 
mately  responsible  for  the  mistakes  which  were  made  and 
which  became  so  obvious  during  the  critical  experience 
of  1834;  it  had  granted  to  the  South  and  West  a  dispro¬ 
portionate  part  of  the  capital  and  thus  tempted  them  to 
inflation.  If  reform  had  been  earnestly  desired,  it  could 
have  been  secured  by  a  different  distribution  of  the  bank’s 

a  Catterall,  137.  &Ibid.,  152. 


244 


The  Second  United  States  Bank 


resources.  In  the  valley  of  the  Mississippi  the  amounts 
due  the  bank  in  the  years  1829-1832  were  as  follows: 


1829  - $11,000,000 

1830  -  18,000,000 

1831  -  23,000,000 

1832  -  31,000,000 


In  May  of  the  latter  year  it  stood  at  $37,500,000.  The 
debt  of  the  western  country  was  thus  more  than  trebled 
in  a  little  more  than  three  years,  and  was  more  than 
doubled  in  fifteen  months.® 

In  1832  Biddle  described  in  some  detail  before  an 
investigating  committee  of  Congress  the  general  proce¬ 
dure  of  the  bank  in  making  loans.  The  length  of  ordinary 
discounts  varied  with  the  state  of  business — sometimes  four 
months,  sometimes  six  months.  In  1830  the  committee 
of  exchange  was  authorized  to  “loan  on  collateral  security 
and  approved  public  stock  large  sums  of  money  at  a  rate 
of  discount  not  lower  than  5  per  cent,”  and  under  these 
ample  powers  the  length  of  loans  was  left  entirely  to 
their  discretion.  The  committee  was  also  authorized  to 
make  loans  on  stocks  or  other  approved  security  at  a 
rate  not  less  than  4^2  per  cent,  and  the  length  of  their 
loans  was  left  to  the  committee.  Frequently  discounts 
had  been  made  where  the  drawer  and  indorser  were 
partners  in  the  same  concern  without  any  additional 
name.  It  was  common  for  the  parent  bank  to  discount 
notes  where  both  the  drawer  and  indorsers  resided  out  of 
the  State  without  requiring  the  name  of  one  responsible 
man  in  Philadelphia,  but  preference,  though  not  exclu- 

°H.  R.  No.  121,  22d  Cong.,  2d  sess.,  p.  37. 


245 


N  at  i  o  n  a  l  M  o  net  ary  Commission 


sively  so,  was  given  to  Philadelphia  paper.®  Loans 
were  made  on  stock  of  canal,  turnpike,  and  bridge 
companies.6  In  1833  it  was  reported  that  accommo¬ 
dation  paper  did  not  cover  more  than  10  per  cent  of 
the  total  discounts,  and  what  there  was  was  of  the 
best  character.0  The  following  table  shows  the  dis¬ 
counts  for  the  bank  in  1818-1836,  distinguishing  be¬ 
tween  loans  on  personal  security,  bank  stock,  and  other 
securities.  Loans  on  “other  securities”  were  generally 
insignificant  until  1832. 


* 

Personal 

security. 

Bank 

stock. 

Other 

securities. 

1818.  _  -  _ -  -  -  -  ... 

$29, 600, 000 

$1 1 , 200, 000 

$300, 000 

1819-  -  -  -  - 

27, 100, 000 

8, 400, 000 

300, 000 

1820- -  -  -  - 

21 , OOO, OOO 

7, 000, 000 

1 , 900, 000 

1821  _ _  -  _ _ _ 

20, 600, OOO 

6, 700, 000 

2, IOO, OOO 

1822 _  --  _ _  - 

20, 300, OOO 

6, 100, 000 

IOO, OOO 

1823.  __  _  __  _  __  _  __  _  _  _ 

22 , 600 , OOO 

6 , 100 , 000 

1824 - -  -  _  - - 

24, 300, OOO 

6, 700, 000 

IOO, OOO 

182s  - -  - -  - 

23 , 200, OOO 

5, 700, 000 

300, OOO 

1826 _ __ _  -  _ 

27 , IOO, OOO 

3 , 100, 000 

IOO, OOO 

1827 _  - _ _  __  _  _ 

24, 300, OOO 

2, 900, 000 

300, OOO 

1828 _  _  _  _______  _  _  _ 

26, 500, OOO 

1 , 900, 000 

300, OOO 

1829.  _  _  _  _ 

29, 900, OOO 

1 , 400, 000 

300, OOO 

1830 -  -  -  _ 

30, 700, OOO 

1 , 000, 000 

300, OOO 

1831 - -  - - 

32, 800, OOO 

700, 000 

IOO, OOO 

1832 _ 

48 , 900 , OOO 

700, OOO 

1833.  __  -  - 

40, IOO, OOO 

700, OOO 

2 , 900, OOO 

1834 -  _ 

33, 700, 000 

900, OOO 

4. OOO, OOO 

18  35 - - - 

29. 900, OOO 

I , OOO, OOO 

3 , 700, 000 

1836 _ _ 

22, 300, OOO 

3,500, OOO 

14, 200, OOO 

flH.  R.  No.  460,  22(1  Cong.,  1st  sess.,  p.  84. 
&  Ibid.,  192. 

c  H.  R.  No.  121,  22d  Cong.,  2d  sess.,  p.  77. 


246 


The  Second  United  States  Bank 


As  a  rule,  the  largest  amount  of  discounts  was  made 
in  the  summer  months.  During  the  years  1820  to  1831 
the  months  of  maximum  discount  were  as  follows: 


1820  _ June. 

1821  _ June. 

1822  _ July- 

1823  - July. 

1824  - - - July. 

1825  _  _ _  May. 

1826  _ June. 

1827  _ June. 

1828  _ June. 

1829  _ May. 

1830  _ June. 

1831  _ October. 


During  the  summer,  in  the  interval  between  the  old  and 
the  new  crop,  commercial  operations  and  the  loans  founded 
on  them  declined.  This  is  again  illustrated  in  the  reduc¬ 
tions  of  the  business  of  the  bank  between  July  1  and  Octo¬ 
ber  1.  For  the  years  1823  to  1833  these  reductions  were 
as  follows : a 


1823  _ $1,240,000 

1824  _  2,119,000 

1825  _  131,000 

1826  _  3,012,000 

1827  _ 2,216,000 

1828  _  1,474,000 

1829  _  3,258,000 

1830  _  2,711,000 

1831  _  Increase. 

1832  -  4,723,000 

1833  -  3,276,000 


a  Niles,  46:  127. 


247 


Na  t  ion  a  l  M  on  et  ar  y  Commission 

PRESIDENT  JACKSON’S  OPPOSITION  TO  THE  BANK. 


President  Jackson,  elected  in  1828,  in  his  first  annual 
,  message  submitted  to  Congress  in  December,  1829, 
v  startled  the  country  bv  an  attack  upon  ttie  bankT  His 
references  to  this  institution  were  confined  to  two  short 
paragraphs,  but  in  these  he  declared  Jthat  both  the  con¬ 
stitutionality  and  expediency  of  the  law  creating  the  bank 
were  well  questioned  by  a  large  portion  of  his  fellow- 

citizens  and  that  the  bank  had  failed  to  establish  a  uni- 

% 

form  and  sound  currency.  He  also  suggested  the  founda¬ 
tion  of  a  fiscal  institution,  based  upon  the  credit  of  the 
Government  and  its  revenues,  which  would  avoid  all 
constitutional  difficulties  and  at  the  same  time  secure 
the  necessary  advantages  to  the  Government  and  the 
country.  Jy 

“The  President’s  reference  to  the  bank  was  made  the 
basis  of  inquiry  in  both  Houses  of  Congress.  The  House 
committee,  in  its  report  of  April  13,  1830,  favorably  dis¬ 
cussed  the  bank  from  three  points  of  view:  First,  its  con- 
Tj stitutionality ;  second,  its  expediency;  and,  third,  in 
accordance  with  the  vague  suggestion  made  by  Jack- 
son  in  his  message,  the  wisdom  of  founding  a  different 
institution  upon  the  credit  and  revenues  of  the  Govern¬ 
ment.  The  argument  in  favor  of  the  expediency  of  the 
bank  was  practically  a  currency  argument.  It  set  forth 
that  the  dispute  was  not  between  an  issue  of  paper  cur¬ 
rency  and  metallic  currency,  but  between  a  national  paper 
currency  and  a  local  paper  currency,  r  Since  Congress 
had  no  constitutional  power  to  forbid  the  issue  of  paper 
money  by  state  banks,  local  bank  notes  would  circulate,  ; 


248 


The  S  e  con  d  United  States  Bank 

and  it  was  not  worth  while  to  discuss  the  superior  advan¬ 
tages  of  a  specie  currency.  The  question  therefore  arose, 
Is  it  not  better  to  have  a  stable  currency  which  by  virtue 
of  its  uniformity  of  value  will  prevent  local  bank  notes 
from  circulating  far  from  the  place  of  issue?  LAnd  the 
committee  was  convinced  that  the  United  States  Bank, 
by  its  notes,  did  actually  furnish  such  a  circulating  me¬ 
dium,  more  satisfactory  even  than  specif  If  the  current 
medium  were  confined  to  specie,  a  planter  in  Louisiana 
who  wished  to  purchase  merchandise  in  Philadelphia 
would  be  obliged  to  pay  i  per  cent  for  a  bill  of  exchange 
on  Louisiana,  covering  the  transportation  and  insurance 
of  the  specie — an  expense  of  which  one-half  was  saved 
through  the  issue  of  drafts.  Again,  the  bank  was  shown 
to  have  performed  with  most  scrupulous  punctuality  its 
stipulation  to  transfer  free  of  expense  the  funds  of  the 
Government  to  any  point  where  they  might  be  wanted.”0 

Jackson,  however,  did  not  give  way.  In  his  second 
annual  message,  December  6,  1830,  he  again  renewed  his 
criticism,  but  indicated  more  definitely  the  kind  of  an 
institution  which  he  thought  might  be  substituted.^He 
suggested  that  a  branch  of  the  Treasury  Department  be 
established  as  a  bank,  based  on  public  and  individual 
deposits,  but  without  power  to  make  loans  or  purchase 
property.^  It  might,  however,  sell  bills  of  exchange  at,  a 
moderate  premium,  and  the  profits  thus  derived  might 
meet  the  expenses  of  remitting  the  funds  of  the  Govern¬ 
ment.  As  it  would  not  be  incorporated,  having  no  stock¬ 
holders,  debts,  or  property,  it  would  avoid  any  objection 
»  - —  -  -- '  —  . .  .  ■  ■  ■  ■  —  — - — — —  ■■ 

cD.  R.  Dewey,  Financial  History  of  the  United  States,  200-201. 


249 


N  at i o n a l  M  on  et  ar  y  Commission 


on  the  ground  of  unconstitutionality,  and  it  would  not 
‘‘operate  on  the  hopes,  fears,  or  interests  of  large  masses 
of  the  community.” 

By  insisting  upon  specie  redemption  of  all  notes  issued 
by  state  banks,  as  a  condition  of  deposit,  such  an  insti¬ 
tution  could  exercise  an  effective  control  on  local  issues. 
In  1831  Senator  Benton  introduced  a  resolution  against 
rechartering  the  bank,  and  again  President  Jackson,  in  the 
message  of  that  year,  referred  to  his  previous  statements 
as  expressing  his  opinion  in  regard  to  the  bank. 

Early  in  1832  the  bank  determined  that  the  time  had 
come  to  secure  a  new  charter.  A  bill  was  consequently 
introduced  which  continued  the  old  bank  for  a  period  of 
fifteen  years  from  1836,  subject,  however,  to  certain 


,  as  follows: 


1.  Two  officers  to  be  appointed  with  authority  to  sign 
all  notes  of  denominations  less  than  $100. 

2.  No  branch  bank  draft  or  other  bank  paper  in  de¬ 
nominations  less  than  $50,  not  payable  at  the  place 
where  issued,  to  be- put  in  circulation. 

3.  The  notes  which  were  made  payable  at  one  place 
only  to  be  received  at  any  office  if  tendered  in  liquida¬ 
tion  or  payment  of  any  balance,  by  any  other  incor¬ 
porated  bank. 

4.  Unlawful  for  the  bank  to  hold  any  real  estate  except 
that  necessary  for  transacting  business. 

5.  Not  more  than  two  branches  to  be  established  in  any 
one  State. 

6.  The  bank  to  pay  an  annuity  of  $200,000  per  annum 
for  fifteen  years. 


250 


The  S  econ  d  u  nit  e  d  St  ates  Bank 


7.  The  bank  not  to  issue  any  notes  of  a  less  denomina¬ 
tion  than  $20. 

8.  The  bank  to  report  to  the  Secretary  of  the  Treasury 
the  names  of  stockholders  who  were  not  resident  citizens, 
and  on  application  of  the  treasurer  of  any  State  to  trans¬ 
mit  a  list  of  stockholders  residing  in  said  State. 

(The  petition  for  recharter  was  favorably  reported  upon 
by  committees  in  the  Senate  and  in  the  House,  but  the 
opponents  endeavored  to  counteract  this  indorsement 
by  securing  the  appointment  in  the  House  of  a  special 
committee  to  investigate  the  ban^l  Three  reports  were 
the  result.  Although  the  majority  was  adverse,  these 
charges  were  regarded  by  the  House  as  inconsequential 
and  the  bill  for  recharter  was  passed  by  both  branches  of 
Congress. 

On  July  10  President  Jackson  vetoed  the  measure.  His- — 
list  of  objections  covered  a  wide  range: 

1.  The  bonus  paid  by  the  bank  was  altogether  too 
small;  the  passage  of  the  bill  was  equal  to  a  gratuity  to 

the  holders  of  the  stock  due  to  the  increase  in  its  market  >'  * 

7 

value.  The  stock  would  rise  at  once  to  125  and  ulti-  » 
mately  to  150,  and  as  about  one-fourth  of  it  was  held 
by  foreigners  this  meant  a  present  to  them.  If  the  Gov¬ 
ernment  sold  a  monopoly,  it  ought  to  ascertain  its  value. 

In  this  case  the  value  was  estimated  at  $17,000,000,  for 
which  the  bank  proposed  to  pay  only  $3,000,000.  The 
Government  should  rather  sell  the  stock  and  put  the 
premiums  in  the  Treasury. 

2.  The  bill  gave  to  the  existing  stockholders  a  pre- 
scriptive  right  to  government  favor  and  did  not  open 
subscriptions  to  public  competition. 


251 


N  at  i  o  n  a  l  M  on  et  a  r  y  Commission 


3.  The  measure  discriminated  against  private  citizens, 
inasmuch  as  notes  of  the  branches  were  made  legal  tender 
if  paid  in  by  any  incorporated  state  bank,  but  were  not 
receivable  except  at  the  office  of  issue  when  offered  by 
any  private  citizen.  This  did  ‘‘not  measure  out  equal 
justice  to  the  high  and  low,  the  rich  and  poor.” 

4.  The  bill  practically  exempted  from  state  tax  that 
^"part  of  the  stock  which  was  owned  by  foreigners.  Ac¬ 
cording  to  Jackson’s  interpretation  of  the  amendment 
proposed  above  under  paragraph  8,  Only  the  stock  held 
in  the  States,  and  not  that  employed  without  them,  would 
be  subject  to  taxation.”^  As  the  names  of  foreign  stock¬ 
holders  would  not  be  reported  to  the  treasurer  of  the 
State,  the  stock  held  by  them  would  escape  local  taxation. 
In  particular,  the  western  States  would  be  unable  to 
obtain  any  adequate  compensation  for  the  drain  of  their 
money  in  exchange  operations. 

I  5.  The  management  would  fall  into  the  control  of  a  few 
citizen  stockholders;  as  foreigners  were  excluded  from 
the  directorate,  and  as  more  and  more  stock  was  trans¬ 
ferred  abroad  under  the  exemption  from  taxation,  it 
would  be  easy  for  a  few  “designing  men”  to  secure  con¬ 
trol  by  monopolizing  the  stock  at  home.  If  the  influence 
of  the  bank  were  thus  “concentered,”  there  would  be 
“cause  to  tremble  for  the  purity  of  our  elections  in  peace 
and  for  the  independence  of  our  country  in  war.”  The 
bank  should  be  “purely  American.” 

^  6.  The  bank  as  proposed  was  unconstitutional.  Al¬ 

though  two  Congresses,  one  in  1791  and  another  in  1816, 
had  decided  in  favor  of  a  bank;  two,  one  in  1811  and 


252 


The  Second  U  nit  ed  States  Bank 

another  in  1815,  had  decided  against  it.  The  expressions 
of  legislative,  judicial,  and  executive  opinion  of  the  States 
against  the  bank,  as  compared  with  those  in  favor,  was 
practically  in  the  proportion  of  4  to  1.  The  decision  of 
the  Supreme  Court  of  the  United  States  in  the  case 
McCulloch  v.  Maryland,  according  to  Jackson,  did  not 

,  ...  — . .  "“■"**  9 

limit  the  authority  either  of  Congress  or  the  Executive. 
That  opinion  did  not  define  whether  a  bank  was  necessary 
or  not,  but  held  that  a  bank  was  constitutional  only  if 
held  to  be  necessary;  it  was  therefore  inferred  that  if 


the  legislative  branch  held  that  the  bank  was  unneces¬ 
sary,  it  was  unconstitutional. 

7.  There  was  suspicion  that  the  bank  had  violated  its 
charter,  but  notwithstanding  this  the  bank  had  declined 
to  demand  the  severest  scrutiny  of  its  transactions. 

The  attack  upon  the  bank  by  President  Jackson,  which 
has  been  briefly  outlined,  and  the  dramatic  events  which 
followed  constitute  a  chapter  in  political  history  rather 
than  an  instructive  commentary  on  banking  methods 
and  policy.  The  charges  were  for  the  most  part  inconse¬ 
quential,  and  for  this  reason  call  for  only  brief  considera--^^ 
tion  by  the  more  special  student  of  banking.  Moreover, 
the  history  of  this  period  of  the  bank’s  career  has  been 
repeatedly  described  by  many  competent  investigators, 
who  have  so  thoroughly  traversed  the  points  at  issue  that 
there  is  but  little  more  to  be  said.  The  charges  against 
the  bank  grew  in  number  as  the  “war”  progressed;  at 
first  they  were  confined  to  the  two  general  accusations 
made  by  President  Jackson  in  his  first  message  of  1829 — 


unconstitutionally and  inexpediency.  When  Jackson’s 


253 


N  at  ion  a  l  M  on  et  a  r  y  Commission 


k 


followers  determined  to  make  the  bank  an  issue,  a  drag-net 
was  thrown  out  and  every  act  of  the  bank  which  could 
possibly  be  construed  unfavorably  was  seized  upon  and 
magnified  into  a  distinct  reason  for  the  non-renewal  of  the 
charter.  By  1832  the  list,  as  presented  by  Senator  Clay¬ 
ton,®  covered  seven  main  and  fifteen  minor  points.  Later 

% 

the  operations  of  the  bank,  as  witnessed  in  its  procedure 
in  the  monetary  crisis  of  1834  and  in  the  withholding  of 
dividends  on  government  stock  because  of  the  dispute 
over  the  French  indemnity  bill,  whether  due  to  resent- 
I  ment  or  to  force  of  circumstances  on  account  of  uncer- 

K  * 

tainty  as  to  the  future,  gave  rise  to  new  and  distinct 
charges  which  should  be  considered  apart  from  the  indict¬ 
ment  drawn  up  at  the  earlier  period,  when  the  business 
of  the  bank  was  of  a  more  normal  character. 

In  brief,  the  charges  against  the  bank  may  be  summed 
up  under  the  following  general  headings:  /First,  that  the 
bank  exercised  an  improper  influence  in  politics;  second, 
that  some  of  its  banking  operations  were  ill-advised  and 
violations  of  the  charter;  third,  that  the  bank  was  uncon¬ 
stitutional;  and  fourth,  that^t  was  a  monopoly  and 
thus  undemocratic  in  character. 


CHARGES  AGAINST  THE  BANK — POLITICAL  ACTIVITY. 

i.  Political  opposition  at  the  time  of  Jackson’s  elec¬ 
tion  had  become  bitter  and  many  personal  animosities 
had  been  aroused.  disposition  of  every  public  ques¬ 

tion  was  influenced  by  intense  partisanship.^ It  was  only 
natural,  therefore,  that  the  bank  should  have  to  suffer 

0  February  27,  1832;  see  Summary  in  Niles,  42:28. 


254 


V- 


sd c 


V*  / 


v 


The  S  econ  d  u  nit  e  d  St  ates  Bank 

in  common  with  other  questions  of  public  policy.  It  is 
hardly  fair,  therefore,  to  hold  the  bank  too  strictly  to 
account  or  to  decide  adversely  against  a  national  or  cen¬ 
tral  bank  at  the  present  time  on  the  ground  that  it  may 
exercise  improper  political  influence  because  of  incidents 
which  occurred  eighty  years  ago. 

But  even  if  the  bank  be  put  to  the  test,  the  central 

vJf(  •  r  r :  1  ■' 

management  will  stand  exonerated.  Catterall,  who  has 
made  a  most  exhaustive  investigation  of  this  charge,  hav¬ 
ing  at  command,  beside  the  usual  sources,  Biddle's  letter- 
books  and  papers,  declares  that^/fit  may  be  said  at  once 
that  there  has  not  been  any  evidence  produced  to  show 
that  the  bank  as  a  national  bank  ever  spent  a  dollar  cor¬ 
ruptly.”  Though  Biddle  did, not  believe  in  creating 
branch  directorates  in  which  political  parties  were  evenly 
balanced,  pains  were  taken  to  appoint  members  of  the 

i 

various  parties,  subject,  however,  to  fitness  for  office^ 

“The  safety  of  the  bank  lies  in  its  complete  estrangement 

- — —————  ~  *  .■  1 

from  politics.”  The  bank,  however,  was  unfortunate^ 
in  “that  the  vast  majority  of  the  bank’s  officers  and  direc-  \ 
tors  were  drawn  from  the  ranks  of  the  party  hostile  to 
Jackson,  not  because  the  bank  supported  this  party,  but 
because  most  of  the  business  men  were  unfriendly  to 
Jackson,  and  the  officers  and  directors  had  to  be  selected 
from  the  ranks  of  business  men.”c_J  Considering  that 
there  were  25  branches,  each  with  its  own  board  of  direc¬ 
tors,  scattered  throughout  the  country  and  that  ques¬ 
tions  involving  banking  practice  excited  much  political 
attention  and  frequently  came  before  state  legislatures, 


3** 


0  Catterall,  243. 


6  Ibid.,  246. 


c  Ibid.,  174. 


255 


N  at i o n a l  M  o  n  et  a  r  y  Commission 


it  was  to  be  expected  that  some  of  the  directors  and  offi¬ 
cers  of  the  branches  would  take  sides  on  one  or  more  of 
these  questions.  Particularly  was  this  so  in  Kentucky, 
where  the  agitation  for  stay  and  relief  laws  was  a  burning 
political  issue  for  many  years. 

In  detail,  the  charge  of  political  activity  of  the  branches 
covered  the  following  specifications: 

1.  That  the  president  of  the  Washington  branch, 
though  incompetent,  was  retained  in  office  because  of 
his  influence  with  the  Monroe  administration.  For  his 
efforts  to  secure  election,  however,  he  was  criticised 
by  Biddle  in  1824  i\“  The  Bank  of  the  United  States  can 
preserve  its  usefulness  to  the  country  only  while  it  main¬ 
tains  its  independence,  its  entire  uncontrolled  exemption 
from  every  influence  and  every  motive  except  the  in¬ 
terest  of  the  stockholders  and  the  service  of  the  country.’^] 

2.  It  was  asserted  that  bank  officials  in  Louisiana 
endeavored  to  influence  elections.  This  charge,  how¬ 
ever,  was"admitted  By  President  Jackson  to  be  without 
foundation.6 

3.  Bank  officials  in  South  Carolina  engaged  in  politics. 

It  was  true  that  the  president  of  the  branch  was  an  active 
politician  and  Biddle  found  it  necessary  to  caution  him 
to  abstain  from  politics.0  J 

4.  The  Portsmouth  bank  was  a  “party  engine.”  This 
charge  was  prompted  by  the  appointment  of  Jeremiah 
Mason,  a  Federalist  and  friend  of  Webster,  who  showed 


a  Sen.  Doc.  No.  17,  23d  Cong.,  2d  sess.,  p.  297. 

&Catterall,  188. 

c  September  27,  1830;  Sen.  Doc.  No.  17,  23d  Cong.,  2d  sess.,  p.  308. 


256 


The  S  e  con  d  United  States  Bank 


little  tact  in  dealing  with  customers  of  the  bank.  For 
years  Mason  had  been  opposed  to  Hill,  one  of  the  ardent 
supporters  of  Jackson  in  New  Hampshire. 

5.  The  president  of  the  Norfolk  branch  had  been 
politically  opposed  to  Jackson.  This  was  explained  as 
limited  to  personal  activity  without  involving  the  bank 


a 


m  any  way 

f  6.  The  cashier  of  the  Lexington  office  in  1831  asked 


Biddle  to  provide  loans  to  help  the  anti- Jackson  can¬ 
didate.  Biddle,  however,  again  restated  his  conviction 
that  officers  should  abstain  from  any  connection  with 
what  was  called  politics,  “to  abstain  not  in  appearance 
merely,  but  entirely,  candidly,  and  honestly.”6 


I 


After  the  bank  was  attacked  it  did  exercise  certain 
pressure  upon  legislative  bodies  in  order  to  support  its 
cause.  It  maintained  lobby  agents  and  endeavored  to 
secure  the  election  of  its  advocates.  For  this  it  should 
be  criticised,  but  in  justice  it  must  be  remembered  that 
this  action  was  subsequent  to  the  original  attack  and  was 
prompted  by  the  special  plight  in  which  the  bank  found 
itself. 

Under  Biddle’s  administration  the  bank  was  also  ac-\ 


/ 


cused  of  selecting  new  branches  from  political  considera 
tions,  “but  there  is  not  a  grain  of  evidence  to  support 
these  charges. /~~Had  such  motives  swayed  the  directors, 


/Xj\a 


6 


they  would  certainly  have  established  many  more  offices, 
for  they  had  most  tempting  inducements  in  the  appli¬ 
cations  made  by  the  Secretary  of  the  Treasury,  the  gov¬ 
ernors  of  territories,  state  legislatures,  statesmen,  Con- 


aCatterall,  250. 


b  Ibid.,  251. 


7069 — 10 


17 


257 


National  Monetary  Commission 


gressmen,  politicians,  state  officials,  and  prominent 
business  men.” ° 

|  In  conclusion,  therefore,  it  may  be  said  that  until  a 
political  attack  had  been  made  upon  it  the  central  man¬ 
agement  of  the  bank  kept  itself  singularly  free  from 
political  activity.  The  branch  management  in  some 
places  was  open  to  criticism,  but  any  defect  here  could 
have  been  remedied  in  a  great  measure  by  a  different 
relationship  between  the  mother  bank  and  the  branches, 
and  criticism  on  this  point  might  well  be  directed  against 
the  plan  of  organization  rather  than  against  the  principle ) 

CRITICISM  OF  BRANCH  DRAFTS. 


A  second  class  of  objections  dealt  more  particularly 


with  the  operations  of  banking.  (The  most  important 
of  these  was  directed  against  the  use  of  branch  drafts  as 
a  means  of  supplying  the '  smaller  denominations  of  cur¬ 
rency.  In  the  first  place,  it  was  claimed  that  their  issue 
was  contrary  to  law,  and  secondly,  that  they  were  harmful 
because  they  contracted  the  circulation  of  state  banksT 
As  to  their  legality,  the  bank  rested  on  the  opinion  of 
able  lawyers,  Webster,  Wirt,  and  Binney,  secured  in  ad¬ 
vance  of  the  use  of  the  drafts.* 6  This  opinion  was  con¬ 
firmed  by  a  decision  of  the  circuit  court  of  the  United 
States,  1831,  which  held  that  while  the  charter  did  not 
expressly  authorize  the  officers  of  the  bank  to  draw  on  the 
branches,  it  did  not  prohibit  them  from  doing  so.c  More¬ 
over,  from  the  beginning  of  their  use,  branch  drafts  had 

a  Catterall,  398. 

&  H.  R.  No.  460,  23d  Cong.,  1st  sess.,  p.  51. 

c  1  Baldwin,  370;  Catterall,  120;  for  opposing  view,  see  correspondence 
between  Woodbury  and  Biddle,  H.  R.  No.  42,  23d  Cong.,  2d  sess. 

258 


The  S  e  con  d  u  nit  e  d  St  ates  Bank 


been  received  by  the  Treasury  Department  in  payment 
of  public  dues  on  an  equality  with  the  notes  of  the  bank. 
To  a  certain  extent,  therefore,  they  had  thus  received 
the  sanction  of  use.  In  McDuffie’s  minority  report  of 
May  ii,  1832,  it  was  held  that  branch  drafts  were  nothing 
more  nor  less  than  bills  of  exchange  drawn  by  the  branch 
upon  the  mother  bank  and  that  the  charter  expressly 
authorized  the  buying  and  selling  of  bills  of  exchange. 
If  these  drafts  were  used  as  circulation,  it  was  not  a 
ground  of  complaint  against  the  bank;  that  was  the 
affair  of  the  community;  the  bank  could  not  be  made 
responsible  for  the  use  which  the  public  made  of  the 
drafts.0  Senator  Benton,  who  followed  up  every  attack  on 
the  bank  with  unwearying  pertinacity,  took  direct  issue 
with  the  court’s  decision,  and  Secretary  Woodbury  declared 
that  the  bank,  in  view  of  the  failure  of  Congress  to  pass 
any  one  of  the  several  bills  introduced  at  successive  sessions 
to  permit  the  issue  of  small  notes  on  easier  terms  than 
permitted  by  the  charter,  had  acted  in  “derogation  of 
the  spirit  of  the  laws  and  in  direct  hostility  to  the  views 
and  policy  of  Congress.”  This  was  “but  another  ad¬ 
monitory  lesson  against  the  danger  of  continuing  a  cor¬ 
poration  with  such  ability  and  inclination  to  disregard 
the  wishes  and  restraints  of  legislative  authority.”* 6 

As  to  the  influence  of  these  drafts  upon  local  circulation^ 
Gouge  declares  that  the  bank  was  thus  able  to  throw  out 
of  circulation  the  notes  of  the  Cape  Fear  Bank  of  North 
Carolina,  and  that  it  displaced  the  notes  of  other  local 

a  H.  R.  No.  460,  23d  Cong.,  1st  sess.,  p.  298. 

&  H.  R.  No.  42,  23d  Cong.,  2d  sess.,  p.  23. 


259 


N  at  ion  a  l  M  o  net  ary  Commission 

banks.  To  this  was  attributed  a  great  part  of  the  diffi¬ 
culties  of  the  year  1828.®  And  Catterall  concludes  that 
the  employment  of  branch  drafts  did  reduce  the  note 
issues  of  local  banks  and  helped  to  give  the  bank  a  larger 
part  of  the  exchange  business/  It  was  also  held  that 
through  their  use  the  bank  lost  control  of  its  circulation 
and  that  their  issue  tended  to  inflation.  To  this,  how¬ 
ever,  may  be  answered  that  the  parent  bank  prepared  all 
the  drafts  and  distributed  them  to  the  several  offices. 
While  it  might  not  know  at  a  given  moment  just  how 
many  had  been  put  out,  it  had  a  final  check.  In  1832  the 
proportion  of  drafts  to  circulation  was  less  than  one- 
fourth.0 

Whatever  may  be  the  merits  or  demerits  of  the  use  of 
branch  drafts,  there  is  no  doubt  that  their  employment 
was  unfortunate  for  the  bank;  it  gave  the  opposition  a 
definite  point  of  attack  and  undoubtedly  increased  the 
hostility  of  state  institutions,  which  found  their  activity 
contracted.  The  bank,  moreover,  lent  itself  indirectly 
to  an  indorsement  of  the  use  of  notes  of  small  denomina¬ 
tions,  as  low  as  $5 ;  this  was  a  mistake  for  at  that  time, 
earnest  efforts  were  made  in  many  of  the  States  to  abolish 
all  notes  under  that  sum.  The  bank,  of  course,  could  not 
issue  these  smaller  notes,  because  of  the  charter  prohibi¬ 
tion,  but  in  throwing  into  circulation  so  large  a  number  of 
$5  drafts  it  apparently  showed  a  lack  of  sympathy  for  the 
movement  which  was  supported  by  the  most  conservative 
element  in  the  country;  it  sacrificed  a  possible  position 

°  Gouge,  Short  History  of  Paper  Money  and  Banking  in  the  United 
States,  201. 

&  Catterall,  131. 

c  For  examination  of  conflicting  opinions,  see  Catterall,  1 20-1 27. 


260 


The  S  e  c  on  d  United  States  Bank 


of  leadership  in  a  needed  reform  for  its  own  individual 
profit. 

CRITICISM  OR  OTHER  BANKING  OPERATIONS. 

Other  accusations  involving  illegal  practices  were:  ^The 
charging  of  usury,  sale  of  coin,  trading  in  public  securi¬ 
ties,  and  speculation  in  real  estate.^!  The  indictment  on 
these  points  is  in  its  final  analysis  of  little  importance,  for, 
as  a  rule,  the  accusation  under  each  heading  referred  to 
but  a  single  action,  which,  if  true,  might  well  be  regarded 
as  exceptional.  The  bank  had  charged  discount  and 
exchange  on  domestic  bills,  thus  obtaining  in  some  cases 
more  than  the  6  per  cent  interest  allowed  by  the  charter. 
It  was  difficult,  however,  to  prove  that  this  device,  which 
was  openly  used  by  state  banks  in  many  sections  to  evade 
the  usury  laws,  had  been  intentionally  employed  by  the 
bank  for  illegal  purposes.  The  bank  did  endeavor  to 
develop  its  business  in  exchange,  even  though  discount 
operations  were  contracted.  This  was  particularly  so 
in  the  West.  As  there  was  a  strong  prejudice  against 
charges  for  exchange,  the  bank  had  to  suffer  in  public 
estimation  for  operations  which  of  themselves  were 
entirely  justifiable. 

The  bank  was  accused  of  selling  coin  when  the  charter 
limitecTit  to  dealings  in  bullion.  In  all,  the  sales  of 
American  gold  coin  amounted  to  $84,734;  an  excuse  for 
this  might  be  found  in  the  fact  that  until  1834  gold  coin 
was  underrated  at  the  mint  and  did  not  circulate  as 
money.®  Another  charge  related  to  speculation  in  pub- 
lie  stocks.  In  1834  the  Treasury  wished  to  pay  off  a  part 


a  Sumner,  Jackson  (revised  edition),  p.  303. 


261 


N  at  io  n  a  l  M  on  et  ar  y  Commission 


X 


of  the  government  indebtedness  represented  by  the  3  per 
cent  stock.  The  bank  was  consequently  notified  that 
deposits  would  be  withdrawn,  but  the  demand  came  at 
an  unfortunate  time.  Previous  withdrawals  for  the 
retirement  of  the  public  debt  had  been  large,  and  the 
bank  had  been  taxed  to  the  utmost  to  make  the  necessary 
contraction  in  its  business  in  order  to  meet  the  plans  of 
the  Treasury.  Biddle,  therefore,  offered  to  pay  a  quar¬ 
ter’s  interest  on  the  stock,  provided  its  retirement  was 
postponed.  The  Treasury  agreed  to  this.  Unfortu¬ 
nately  the  agent,  General  Cadwalader,  who  was  sent  to 
London  in  order  to  secure  from  the  holders  of  the  3  per 
cent  stock,  which  was  largely  owned  abroad,  their  con¬ 
sent  to  delay  retirement  and  accept  the  responsibility  of 
the  bank  for  the  payment  of  interest,  permitted  the 
banking  house  of  the  Barings,  which  carried  through  the 
negotiations,  to  deviate  from  this  plan.  The  Barings 
bought  outright  the  3  per  cent  stock,  and  thus  the  bank 
indirectly  became  responsible  for  the  purchase  of  govern¬ 
ment  securities.  Although  the  arrangements  made  by 
Cadwalader  and  the  Barings  were,  disavowed  by  Biddle, 
the  negotiations,  coming  at  ~a  time  when  the  bank  was 
under  fire^gave  critics  ample  opportunity  for  charging  the 
bank  witfutrickery  and  a  high-handed  purpose  of  defeat¬ 
ing  the  Government  in  its  efforts  to  extinguish  the  dej^. 

The  dealings  of  the  bank  in  real  estate  admit  of  easy 
explanation.  During  the  earlier  and  more  speculative 
period  of  the  bank’s  operations,  the  branch  at  Cincinnati 
was  obliged  to  take  a  large  amount  of  real  estate  in  settle- 
ment  of  indebtedness;  the  sale  of  this  was  slow  and  the 
bank  found  it  necessary  to  improve  some  of  the  property 


262 


The  S  econ  d  u  nit  ed  States  Bank 


in  order  to  secure  any  sale  at  all.  For  many  years,  there-  ^ 
fore,  the  bank  was  both  landlord  and  purchaser.  All  the 
evidence,  however,  goes  to  show  that  the  bank  made 
every  possible  effort  to  get  rid  of  this  dead  asset  and"" 
convert  it  into  more  active  funds. 

Additional  charges  against  the  bank  reflected  upon  the  — 
judgment  of  the  management/  The  bank  was  accused  of 
establishing  too  many  branches,  making  excessive  ex¬ 
penditures,  which  were  charged  up  to  the  contingency 
accountTof  favoritism  to  Thomas  Biddle,  a  cousin  of  the 
President,  of  refusing  to  give  to  the  state  officials  of  Con¬ 
necticut  a  list  of  stockholders  resident  in  that  State  to 

be  used  by  the  taxing  authorities,  of  making  loans  to 

- - -  1  ^ 

Congressmen,  and  of  putting  the  control  of  the  Bank  in 
the  hands  of  the  exchange  committee  of  which  Biddle 
was  the  head.  For  the  most  part,  these  were  trivial 
reasons  ta  justify  a  refusal  to  recharter  the  bank  if  its 
general  policy  was  otherwise  advantageous.  ^  The  last 
accusation  is  the  most  serious  one,  but  it  concerns  the 
personality  of  one  man,  the  president  of  the  bank  rather 
than  the  merit  of  the  system.  Biddle  was  a  large  figure  * 
in  the  contest.  Catterall’s  characterization  is  accurate 
and  instructive:  '^Nicholas  Biddle  was  a  man  of  intense 
energy,  autocratic in  temper,  and  possessing  supreme 
confidence  in  his  own  judgment.  It  was  inevitable  that 
he  should  rule  and  not  merely  reign,  and  the  proofs  that 
he  did  rule  are  observable  everywhere.  He  appointed 
the  committees  of  the  bank  after  1828,  though  the  rules 
giving  him  this  power  were  not  adopted  until  1833;  he 
does  not  want  the  bank’s  books  examined  by  the  gov- 


263 


National  Monetary  Commission 


ernment  directors  and  he  gives  orders  that  the  books 
must  not  be  examined  by  them,  though  only  the  board 
could  rightfully  do  this.”0  Biddle  became  the  bank  ex¬ 
ecutive  at  a  time  when  its  business  was  small  and  divi¬ 
dends  in  doubt.  ^Ie  devoted- his-  whole  heart  to  the 
service  of  the  bank;  his  directors,  as  is  often  the  case  in 
like  circumstances,  accepted  his  leadership  without  crit¬ 
ically  reviewing  his  acts^'The  quarterly  committee  of 
examination  provided  for  under  the  by-laws  did  its  work 
in  a  perfunctory  manner,  and  as  a  consequence  the 
responsibility  for  every  act  had  to  be  shouldered  by 
Biddle^  ~  ~ 

f — Aside  from  these  specific  criticisms,  opposition  to  the 
bank  was  inspired  by  political  intrigue  and  by  selfish 
.  jealousy  of  state  banks.  Many  were  convinced  that 
Clay,  who  was  a  candidate  for  the  Presidency  in  1832, 
was  behind  Biddle  in  forcing  the  bank  question  to  the 
front,  in  order  to  secure  political  capital.  There  is 
reason  to  believe  that  Clay  foresaw  a  veto  from  Jack- 
son,  and  on  that  issue  thought  he  could  successfully 
appeal  to  the  country  in  the  autumn  elections.  Biddle 
was  also  of  this  opinion  and  declared  that  Jackson’s 
veto  exhibited  “all  the  fury  of  a  chained  panther  biting 
the  bars  of  his  cage.”b  j 

Clay  mistook  the  temper  of  the  voters.  Aside  from 
the  opposition  to  the  bank,  there  were  other  qualities 
in  Jackson’s  administration  which  commanded  the  con¬ 
fidence  of  the  people.  There  was  a  general  approval  of 
his  position  on  the  tariff  and  monopolistic  corporations. 
Jackson  was  reelected  and  interpreted  this  as  a  popular 


°Catterall,  275. 


b  Meigs,  Life  of  Ingersoll,  177. 


264 


The  S  econ  d  u  nit  ed  States  Bank 


indorsement  of  his  position  on  the  bank.  The  next  step 
was  the  removal  of  the  deposits,  even  at  the  cost  of  dis¬ 
missing  a  Cabinet  secretary.  The  bank,  on  its  side,  was 
provoked  into  imprudent  acts,  which  added  to  the  bitter¬ 
ness  of  feeling;  compromise  was  impossible,  and  the 
contest  became  a  war  of  extermination.  The  history 
of  this  later  period  therefore  is  a  record  of  recrimination 
and  counter  recrimination ;  of  investigations  which  settled 
nothing;  and  finally  of  denunciatory  resolutions  and 
efforts  to  expunge  resolutions.  ^Biddle,  the  successful 
bank  president,  engaged  in  daring  and  imprudent  specu¬ 
lations,  and  the  bank,  in  order  to  continue  its  existence, 
secured  a  charter  from  the  State  of  Pennsylvania  under 
terms  which  meant  either  legislative  corruption  or  a 
most  astonishing  ignorance  of  the  fundamental  conditions 
of  sound  banking.  7 

A  second  source  of  hostility  to  the  bank  is  to  be  found 
in  the  opposition  of  local  banks;  this  was  not  universal, 
but  it  was~sfrong  enough  in  some  States  to  be  an  impor¬ 
tant  factor.  Especially  was  this  so  in  New  York;  a 
considerable  parEof  the  national  revenue  was  paid  into 
the  branch  of  the  bank  at  New  York  City,  and  was  con¬ 
sequently  under  control  of  the  mother  bank  at  Phila¬ 
delphia.  The  state  banks  naturally  desired  these  de¬ 
posits  and  used  their  influence  to  arouse  antagonism  to 
the  bank  and  indorsement  of  Jackson’s  policy. 


Appendix  A. 

Act  of  Incorporation. 

[Fourteenth  Congress,  first  session,  chapter  44.  1816.] 

Chapter  XLIV. — An  act  to  incorporate  the  subscribers  to  the  Bank  of 

the  United  States. 

Be  it  enacted  by  the  Senate  and  House  of  Representatives  of  the  United 
States  of  America,  in  Conor  ess  assembled.  That  a  bank  of  the  United  4  bank  of  the 
States  of  America  shall  be  established,  with  a  capital  of  thirty-five  with  a  capital  of 
millions  of  dollars,  divided  into  three  hundred  and  fifty  thousand  ^3S,°00’000’ etc‘ 
shares,  of  one  hundred  dollars  each  share.  Seventy  thousand  shares, 
amounting  to  the  sum  of  seven  millions  of  dollars,  part  of  the  capital 
of  the  said  bank,  shall  be  subscribed  and  paid  for  by  the  United  States, 
in  the  manner  hereinafter  specified;  and  two  hundred  and  eighty  thou¬ 
sand  shares,  amounting  to  the  sum  of  twenty-eight  millions  of  dollars, 
shall  be  subscribed  and  paid  for  by  individuals,  companies,  or  corpo¬ 
rations,  in  the  manner  hereinafter  specified. 

Sec.  2.  And  be  it  further  enacted,  That  subscriptions  for  the  sum  of 
twenty-eight  millions  of  dollars,  towards  constituting  the  capital 
of  the  said  bank,  shall  be  opened  on  the  first  Monday  in  July  next,  at 
the  following  places:  that  is  to  say,  at  Portland,  in  the  District  of  Maine;  Places,  etc., 
at  Portsmouth,  in  the  State  of  New  Hampshire;  at  Boston,  in  the  State  of  scrindons.ngSUb* 
Massachusetts;  at  Providence,  in  the  State  of  Rhode  Island;  at  Middle- 
town,  in  the  State  of  Connecticut;  at  Burlington,  in  the  State  of  Ver¬ 
mont;  at  New  York,  in  the  State  of  New  York;  at  New  Brunswick, 
in  the  State  of  New  Jersey;  at  Philadelphia,  in  the  State  of  Pennsyl¬ 
vania;  at  Wilmington,  in  the  State  of  Delaware;  at  Baltimore,  in  the 
State  of  Maryland;  at  Richmond,  in  the  State  of  Virginia;  at  Uexington, 
in  the  State  of  Kentucky;  at  Cincinnati,  in  the  State  of  Ohio;  at  Ral¬ 
eigh,  in  the  State  of  North  Carolina;  at  Nashville,  in  the  State  of 
Tennessee;  at  Charleston,  in  the  State  of  South  Carolina;  at  Augusta, 
in  the  State  of  Georgia,  at  New  Orleans,  in  the  State  of  Louisiana;  and 
at  Washington,  in  the  district  of  Columbia.  And  the  said  subscrip¬ 
tions  shall  be  opened  under  the  superintendence  of  five  commissioners 
at  Philadelphia,  and  of  three  commissioners  at  each  of  the  other 
places  aforesaid,  to  be  appointed  by  the  President  of  the  United 
States,  who  is  hereby  authorized  to  make  such  appointments,  and 
shall  continue  open  every  day,  from  the  time  of  opening  the  same, 
between  the  hours  of  ten  o’clock  in  the  forenoon  and  four  o’clock  in 
the  afternoon,  for  the  term--  of  twenty  days,  exclusive  of  Sundays, 
when  the  same  shall  be  closed,  and  immediately  thereafter  the  com- 


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Places,  etc.,  missioners,  or  any  two  of  them,  at  the  respective  places  aforesaid,  shall 
scrfption^etc!  cause  two  transcripts  or  copies  of  such  subscriptions  to  be  made,  one 
of  which  they  shall  send  to  the  Secretary  of  the  Treasury,  one  they 
shall  retain,  and  the  original  they  shall  transmit,  within  seven  days 
from  the  closing  of  the  subscriptions  as  aforesaid,  to  the  commissioners 
at  Philadelphia,  aforesaid.  And  on  the  receipt  of  the  said  original 
subscriptions,  or  of  either  of  the  said  copies  thereof,  if  the  original  be 
lost,  mislaid,  or  detained,  the  commissioners  at  Philadelphia  aforesaid, 
or  a  majority  of  them,  shall  immediately  thereafter  convene,  and  pro¬ 
ceed  to  take  an  account  of  the  said  subscriptions.  And  if  more  than 
the  amount  of  twenty-eight  millions  of  dollars  shall  have  been  sub¬ 
scribed,  then  the  said  last  mentioned  commissioners  shall  deduct 
the  amount  of  such  excess  from  the  largest  subscriptions,  in  such 
manner  as  that  no  subscription  shall  be  reduced  in  amount,  while  any 
one  remains  larger:  Provided ,  That  if  the  subscriptions  taken  at  either 
of  the  places  aforesaid  shall  not  exceed  three  thousand  shares,  there 
shall  be  no  reduction  of  such  subscriptions,  nor  shall,  in  any  case,  the 
subscriptions  taken  at  either  of  the  places  aforesaid  be  reduced  below 
that  amount.  And  in  case  the  aggregate  amount  of  the  said  subscrip¬ 
tions  shall  exceed  twenty-eight  millions  of  dollars,  the  said  last  men¬ 
tioned  commissioners,  after  having  apportioned  the  same  as  aforesaid, 
shall  cause  lists  of  the  said  apportioned  subscriptions,  to  be  made  out, 
including  in  each  list  the  apportioned  subscription  for  the  place  where 
the  original  subscription  was  made,  one  of  which  lists  they  shall  trans¬ 
mit  to  the  commissioners  or  one  of  them,  under  whose  superintendence 
such  subscriptions  were  originally  made,  that  the  subscribers  may 
thereby  ascertain  the  number  of  shares  to  them  respectively  appor¬ 
tioned  as  aforesaid.  And  in  case  the  aggregate  amount  of  the  said 
subscriptions  made  during  the  period  aforesaid,  at  all  the  places  afore¬ 
said,  shall  not  amount  to  twenty-eight  millions  of  dollars,  the  sub¬ 
scriptions  to  complete  the  said  sum  shall  be  and  remain  open  at  Phila¬ 
delphia  aforesaid,  under  the  superintendence  of  the  commissioners 
appointed  for  that  place,  and  the  subscriptions  may  be  then  made 
by  any  individual,  company,  or  corporation,  for  any  number  of  shares 
not  exceeding,  in  the  whole,  the  amount  required  to  complete  the  said 
sum  of  twenty-eight  millions  of  dollars. 

Regulations  Sec.  3.  And  be  it  further  enacted,  That  it  shall  be  lawful  for  any  indi¬ 
scretions8  an d  vidual,  company,  corporation,  or  state,  when  the  subscriptions  shall 
thern^tc1 1 S  °n^e  opened  as  herein  before  directed,  to  subscribe  for  any  number  of 
shares  of  the  capital  of  the  said  bank,  not  exceeding  three  thousand  shares, 
and  the  sums  so  subscribed  shall  be  payable,  and  paid,,  in  the  manner 
following;  that  is  to  say,  seven  millions  of  dollars  thereof  in  gold  or 
silver  coin  of  the  United  States,  or  in  gold  coin  of  Spain,  or  the  domin¬ 
ions  of  Spain,  at  the  rate  of  one  hundred  •'bents  for  every  twenty-eight 
grains  and  sixty  hundredths  of  a  grain  of  the  actual  weight  thereof,  or 


268 


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The  Second  United  States  Bank 


in  other  foreign  gold  or  silver  coin  at  the  several  rates  prescribed  by 
the  first  section  of  an  act  regulating  the  currency  of  foreign  coins  in  the 
United  States,  passed  tenth  day  of  April,  one  thousand  eight  hundred  chA2p2ril  IO>  l8o6t 
and  six,  and  twenty-one  millions  of  dollars  thereof  in  like  gold  or  silver 
coin,  or  in  the  funded  debt  of  the  United  States  contracted  at  the  time 
of  the  subscriptions  respectively.  And  the  payments  made  in  the 
funded  debt  of  the  United  States,  shall  be  paid  and  received  at  the 
following  rates:  that  is  to  say,  the  funded  debt  bearing  an  interest  of 
six  per  centum  per  annum,  at  the  nominal  or  par  value  thereof,  the 
funded  debt  bearing  an  interest  of  three  per  centum  per  annum,  at  the 
rate  of  sixty-five  dollars  for  every  sum  of  one  hundred  dollars  of 
the  nominal  amount  thereof,  and  the  funded  debt  bearing  an  interest 
of  seven  per  centum  per  annum,  at  the  rate  of  one  hundred  and  six  dol¬ 
lars  and  fifty-one  cents,  for  every  sum  of  one  hundred  dollars  of  the 
nominal  amount  thereof;  together  with  the  amount  of  the  interest 
accrued  on  the  said  several  denominations  of  funded  debt,  to  be  com¬ 
puted  and  allowed  to  the  time  of  subscribing  the  same  to  the  capital 
of  the  said  bank  as  aforesaid.  And  the  payments  of  the  said  subscrip¬ 
tions  shall  be  made  and  completed  by  the  subscribers,  respectively, 
at  the  times  and  in  the  manner  following;  that  is  to  say,  at  the  time  of 
subscribing  there  shall  be  paid  five  dollars  on  each  share,  in  gold  or 
silver  coin  as  aforesaid,  and  twenty-five  dollars  more  in  coin  as  afore¬ 
said,  or  in  funded  debt  as  aforesaid;  at  the  expiration  of  six  calendar 
months  after  the  time  of  subscribing,  there  shall  be  paid  the  further 
sum  of  ten  dollars  on  each  share,  in  gold  or  silver  coin  as  aforesaid, 
and  twenty-five  dollars  more  in  coin  as  aforesaid,  or  in  funded  debt  as 
aforesaid;  at  the  expiration  of  twelve  calendar  months  from  the  time 
of  subscribing,  there  shall  be  paid  the  further  sum  of  ten  dollars  on 
each  share  in  gold  or  silver  coin  as  aforesaid,  and  twenty-five  dollars 
more,  in  coin  as  aforesaid,  or  in  funded  debt  as  aforesaid. 

Sec.  4.  And  be  it  further  enacted,  That  at  the  time  of  subscribing  to 
the  capital  of  the  said  bank  as  aforesaid,  each  and  every  subscriber 
shall  deliver  to  the  commissioners,  at  the  place  of  subscribing,  as  well 
the  amount  of  their  subscriptions  respectively  in  coin  as  aforesaid,  as 
the  certificates  of  funded  debt,  for  the  funded  debt  proportions  of  their 
respective  subscriptions,  together  with  a  power  of  attorney,  author¬ 
izing  the  said  commissioners,  or  a  majority  of  them,  to  transfer  the 
said  stock  in  due  form- of  law  to  “  the  president,  directors,  and  company 
of  the  bank  of  the  United  States,”  as  soon  as  the  said  bank  shall  be 
organized.  Provided  always,  That  if,  in  consequence  of  the  apportion¬ 
ment  of  the  shares  in  the  capital  of  the  said  bank  among  the  subscribers, 
in  the  case,  and  in  the  manner,  herein  before  provided,  any  subscriber 
shall  have  delivered  to  the  commissioners,  at  the  time  of  subscribing, 
a  greater  amount  of  gold  or  silver  coin  and  funded  debt  than  shall  be 
necessary  to  complete  the  payments  for  the  share  or  shares  to  such 


269 


N  at i on  a l  M  on  et ary  Commission 


subscribers,  apportioned  as  aforesaid,  the  commissioners  shall  only 
retain  so  much  of  the  said  gold  or  silver  coin,  and  funded  debt,  as  shall 
be  necessary  to  complete  such  payments,  and  shall,  forthwith,  return 
the  surplus  thereof,  on  application  for  the  same,  to  the  subscribers 
lawfully  entitled  thereto.  And  the  commissioners,  respectively,  shall 
deposit  the  gold  and  silver  coin,  and  certificates  of  public  debt  by  them 
respectively  received  as  aforesaid  from  the  subscribers  to  the  capital 
of  the  said  bank,  in  some  place  of  secure  and  safe  keeping,  so  that  the 
same  may  and  shall  be  specifically  delivered  and  transferred,  as  the 
same  were  by  them  respectively  received,  to  the  president,  directors, 
and  company,  of  the  bank  of  the  United  States,  or  to  their  order,  as 

Reasonable  soon  as  shall  be  required  after  the  organization  of  the  said  bank.  And 
compensation  to  .  .  .  .  ,  ...... 

the  commission-  the  said  commissioners  appointed  to  superintend  the  subscriptions  to 

ers>  the  capital  of  the  said  bank  as  aforesaid,  shall  receive  a  reasonable  com¬ 

pensation  for  their  services  respectively,  and  shall  be  allowed  all  reason¬ 
able  charges  and  expenses  incurred  in  the  execution  of  their  trust,  to 
be  paid  by  the  president,  directors,  and  company,  of  the  bank,  out 
of  the  funds  thereof. 


The  United  Sue.  s.  And  be  it  further  enacted,  That  it  shall  be  lawful  for  the 
States  may  re-  •  * 

deem  the  funded  United  States  to  pay  and  redeem  the  funded  debt  subscribed  to  the 
the  bank’  may  capital  of  the  said  bank  at  the  rates  aforesaid,  in  such  sums,  and  at 
sell  for  gold  and  such  times,  as  shall  be  deemed  expedient,  anything  in  any  act  or  acts 
of  Congress  to  the  contrary  thereof  notwithstanding.  And  it  shall 
also  be  lawful  for  the  president,  directors,  and  company,  of  the  said 
bank  to  sell  and  transfer,  for  gold  and  silver  coin,  or  bullion,  the 
funded  debt  subscribed  to  the  capital  of  the  said  bank  as  aforesaid: 
Provided  always ,  That  they  shall  not  sell  more  thereof  than  the  sum 
of  two  millions  of  dollars  in  any  one  year;  nor  sell  any  part  thereof  at 


any  time  within  the  United  States,  without  previously  giving  notice 
of  their  intention  to  the  Secretary  of  the  Treasury,  and  offering  the 
same  to  the  United  States  for  the  period  of  fifteen  days,  at  least,  at 


the  current  price,  not  exceeding  the  rates  aforesaid, 
of  ^the  ^Treasury  ^EC.  6-  And  be  it  further  enacted,  That  at  the  opening  of  subscrip¬ 
ts  subscribe  on  tion  to  the  capital  stock  of  the  said  bank,  the  Secretary  of  the  Treasury 
United  °statese  shall  subscribe,  or  cause  to  be  subscribed,  on  behalf  of  the  United 
etc-  States,  the  said  number  of  seventy  thousand  shares,  amounting  to 

seven  millions  of  dollars,  as  aforesaid,  to  be  paid  in  gold  or  silver  coin, 
or  in  stock  of  the  United  States,  bearing  interest  at  the  rate  of  five 
per  centum  per  annum;  and  if  payment  thereof,  or  of  any  part  thereof, 
be  made  in  public  stock,  bearing  interest  as  aforesaid,  the  said  interest 
shall  be  payable  quarterly,  to  commence  from  the  time  of  making  such 
payment  on  account  of  the  said  subscription,  and  the  principal  of  the 
said  stock  shall  be  redeemable  in  any  sums,  and  at  any  periods,  which 
the  Government  shall  deem  fit.  And  the  Secretary  of  the  Treasury 
shall  cause  the  certificates  of  such  public  stock  to  be  prepared,  and 


270 


The  Second  U  nit  e  d  St  ates  Bank 


made  in  the  usual  form,  and  shall  pay  and  deliver  the  same  to  the 
president,  directors,  and  company,  of  the  said  bank  on  the  first  day  of 
January,  one  thousand  eight  hundred  and  seventeen,  which  stock  it 
shall  be  lawful  for  the  said  president,  directors,  and  company,  to  sell 
and  transfer  for  gold  and  silver  coin  or  bullion,  at  their  discretion: 

Provided,  They  shall  not  sell  more  than  two  millions  of  dollars  thereof 
in  any  one  year. 

Sec.  7.  And  be  it  further  enacted,  That  the  subscribers  to  the  said  The  ^subscrib- 
bank  of  the  United  States  of  America,  their  successors  and  assigns,  incorporated  etc. 
shall  be,  and  are  hereby,  created  a  corporation  and  body  politic,  by 
the  name  and  style  of  “The  president,  directors,  and  company  of  the 
bank  of  the  United  States,”  and  shall  so  continue  until  the  third  day 

of  March,  in  the  year  one  thousand  eight  hundred  and  thirty-six,  and  Corporate 

name. 

by  that  name  shall  be,  and  are  hereby,  made  able  and  capable,  in  law, 
to  have,  purchase,  receive,  possess,  enjoy,  and  retain,  to  them  and 
their  successors,  lands,  rents,  tenements,  hereditaments,  goods,  chat¬ 
tels  and  effects,  of  whatsoever  kind,  nature,  and  quality,  to  an  amount 
not  exceeding,  in  the  whole,  fifty-five  millions  of  dollars,  including 
the  amount  of  the  capital  stock  aforesaid;  and  the  same  to  sell,  grant, 
demise,  alien  or  dispose  of;  to  sue  and  be  sued,  plead  and  be  impleaded, 
answer  and  be  answered,  defend  and  be  defended,  in  all  state  courts 
having  competent  jurisdiction,  and  in  any  circuit  court  of  the  United 
States;  and  also  to  make,  have,  and  use,  a  common  seal,  and  the 
same  to  break,  alter,  and  renew,  at  their  pleasure;  and  also  to  ordain, 
establish,  and  put  in  execution,  such  by-laws,  and  ordinances,  and 
regulations,  as  they  shall  deem  necessary  and  convenient  for  the  gov¬ 
ernment  of  the  said  corporation,  not  being  contrary  to  the  Constitu¬ 
tion  thereof,  or  to  the  laws  of  the  United  States;  and  generally  to  do 
and  execute  all  and  singular  the  acts,  matters,  and  things,  which  to 
them  it  shall  or  may  appertain  to  do;  subject,  nevertheless,  to  the 
rules,  regulations,  restrictions,  limitations,  and  provisions,  hereinafter 
prescribed  and  declared. 

SEC.  8.  And  be  it  further  enacted,  That  for  the  management  of  the  Twenty  -  five 
.  .  directors;  five  to 

affairs  of  the  said  corporation,  there  shall  be  twenty-five  directors,  be  appointed  by 

five  of  whom,  being  stockholders,  shall  be  annually  appointed  by  the  president’ 

President  of  the  United  States,  by  and  with  the  advice  and  consent  of 

the  vSenate,  not  more  than  three  of  whom  shall  be  residents  of  any 

one  state;  and  twenty  of  whom  shall  be  annually  elected  at  the 

banking  house  in  the  city  of  Philadelphia,  on  the  first  Monday  of 

January,  in  each  year,  by  the  qualified  stockholders  of  the  capital  of 

the  said  bank,  other  than  the  United  States,  and  by  a  plurality  of 

votes  then  and  there  actually  given,  according  to  the  scale  of  voting 

hereinafter  prescribed:  Provided  always,  That  no  person,  being  a  di- co^ernhfgti0the 

rector  in  the  bank  of  the  United  States,  or  any  of  its  branches,  shall  direction  of  the 

bffnk  etc 

be  a  director  in  any  other  bank;  and  should  any  such  director  act  as 


271 


N  at  ion  a  l  M  on  et  ary  Commission 


a  director  in  any  other  bank,  it  shall  forthwith  vacate  his  appointment 
in  the  direction  of  the  bank  of  the  United  States.  And  the  directors, 
#  so  duly  appointed  and  elected,  shall  be  capable  of  serving,  by  virtue 
of  such  appointment  and  choice,  from  the  first  Monday  in  the  month 
of  January  of  each  year,  until  the  end  and  expiration  of  the  first  Mon¬ 
day  in  the  month  of  January  of  the  year  next  ensuing  the  time  of  each 
annual  election  to  be  held  by  the  stockholders  as  aforesaid.  And  the 
board  of  directors,  annually,  at  the  first  meeting  after  their  election 
in  each  and  every  year,  shall  proceed  to  elect  one  of  the  directors  to 
be  president  of  the  corporation,  who  shall  hold  the  said  office  during 
the  same  period  for  which  the  directors  are  appointed  and  elected  as 
aforesaid:  Provided  also,  That  the  first  appointment  and  election  of 
the  directors  and  president  of  the  said  bank  shall  be  at  the  time  and 
for  the  period  hereinafter  declared:  And  provided  also,  That  in  case 
it  should  at  any  time  happen  that  an  appointment  or  election  of  directors, 
or  an  election  of  the  president  of  the  said  bank,  should  not  be  so  made 
as  to  take  effect  on  any  day  when,  in  pursuance  of  this  act,  they  ought 
to  take  effect,  the  said  corporation  shall  not,  for  that  cause,  be  deemed 
to  be  dissolved;  but  it  shall  be  lawful  at  any  other  time  to  make  such 
appointments,  and  to  hold  such  elections,  (as  the  case  may  be,)  and  the 
manner  of  holding  the  elections  shall  be  regulated  by  the  by-laws  and 
ordinances  of  the  said  corporation;  and  until  such  appointments  or 
elections  be  made,  the  directors  and  president  of  the  said  bank,  for  the 
^  time  being,  shall  continue  in  office:  And  provided  also,  That  in  case  of 
the  death,  resignation,  or  removal  of  the  president  of  the  said  corpora¬ 
tion,  the  directors  shall  proceed  to  elect  another  president  from  the 
directors  as  aforesaid:  and  in  case  of  the  death,  resignation,  or  absence, 
from  the  .United  States,  or  removal  of  a  director  from  office,  the  va¬ 
cancy  shall  be  supplied  by  the  President  of  the  United  States,  or  by 
the  stockholders,  as  the  case  may  be.  But  the  President  of  the  United 
States  alone  shall  have  power  to  remove  any  of  the  directors  appointed 
by  him  as  aforesaid. 

Manner  and  Sec.  9.  And  be  it  further  enacted,  That  as  soon  as  the  sum  of  eight 
going  into  opera-  millions  four  hundred  thousand  dollars  in  gold  and  silver  coin,  and 
tion,  etc.  jn  the  public  debt,  shall  have  been  actually  received  on  account  of  the 

subscriptions  to  the  capital  of  the  said  bank  (exclusively  of  the  subscrip¬ 
tion  aforesaid,  on  the  part  of  the  United  States)  notice  thereof  shall  be 
given  by  the  persons  under  whose  superintendence  the  subscriptions 
shall  have  been  made  at  the  city  of  Philadelphia,  in  at  least  two  news¬ 
papers  printed  in  each  of  the  places,  (if  so  many  be  printed  in  such 
places,  respectively,)  where  subscriptions  shall  have  been  made,  and 
the  said  persons  shall,  at  the  same  time,  and  in  like  manner,  notify 
a  time  and  place  within  the  said  city  of  Philadelphia,  at  the  distance 
of  at  least  thirty  days  from  the  time  of  such  notification,  for  proceed¬ 
ing  to  the  election  of  twenty  directors  as  aforesaid,  and  it  shall  be 


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The  Second  United  States  Bank 


lawful  for  such  election  to  be  then  and  there  made.  And  the  Presi¬ 
dent  of  the  United  States  is  hereby  authorized,-  during  the  present 
session  of  Congress,  to  nominate,  and,  by  and  with  the  advice  and 
consent  of  the  Senate,  to  appoint,  five  directors  of  the  said  bank, 
though  not  stockholders,  anything  in  the  provisions  of  this  act  to  the 
contrary  notwithstanding;  and  the  persons  who  shall  be  elected  and 
appointed  as  aforesaid,  shall  be  the  first  directors  of  the  said  bank, 
and  shall  proceed  to  elect  one  of  the  directors  to  be  President  of  the 
said  bank;  and  the  directors  and  president  of  the  said  bank  so  appointed 
and  elected  as  aforesaid,  shall  be  capable  of  serving  in  their  respective 
office,  by  virtue  thereof,  until  the  end  and  expiration  of  the  first 
Monday  of  the  month  of  January  next  ensuing  the  said  appointments 
and  elections;  and  they  shall  then  and  thenceforth  commence,  and  con¬ 
tinue  the  operations  of  the  said  bank,  at  the  city  of  Philadelphia. 

Sec.  io.  And  be  it  further  enacted,  That  the  directors,  for  the  time 
being  shall  have  power  to  appoint  such  officers,  clerks,  and  servants, 
under  them  as  shall  be  necessary  for  executing  the  business  of  the  said 
corporation,  and  to  allow  them  such  compensation  for  their  services, 
respectively,  as  shall  be  reasonable;  and  shall  be  capable  of  exercis¬ 
ing  such  other  powers  and  authorities  for  the  well  governing  and  order¬ 
ing  of  the  officers  of  the  said  corporation,  as  shall  be  prescribed,  fixed, 
and  determined,  by  the  laws,  regulations,  and  ordinances  of  the  same. 

Sec.  ii.  And  be  it  further  enacted,  That  the  following  rules,  restric¬ 
tions,  limitations,  and  provisions,  shall  form  and  be  fundamental 
articles  of  the  constitution  of  the  said  corporation,  to  wit: 

First.  The  number  of  votes  to  which  the  stockholders  shall  be  entitled, 
in  voting  for  directors,  shall  be  according  to  the  number  of  shares  he, 
she,  or  they,  respectively,  shall  hold,  in  the  proportion  following, 
that  is  to  say;  for  one  share  and  not  more  than  two  shares,  one  vote; 
for  every  two  shares  above  two,  and  not  exceeding  ten,  one  vote; 
for  every  four  shares  above  ten,  and  not  exceeding  thirty,  one  vote; 
for  every  six  shares  above  thirty,  and  not  exceeding  sixty,  one  vote; 
for  every  eight  shares  above  sixty,  and  not  exceeding  one  hundred, 
one  vote;  and  for  every  ten  shares  above  one  hundred,  one  vote;  but 
no  person,  co-partnership,  or  body  politic,  shall  be  entitled  to  a  greater 
number  than  thirty  votes;  and  after  the  first  election,  no  share  or  shares 
shall  confer  a  right  of  voting,  which  shall  not  have  been  holden  three 
calendar  months  previous  to  the  day  of  election.  And  stockholders 
actually  resident  within  the  United  States,  and  none  other,  may  vote 
in  elections  by  proxy. 

Second.  Not  more  than  three-fourths  of  the  directors  elected  by  the 
stockholders,  and  not  more  than  four-fifths  of  the  directors  appointed 
by  the  President  of  the  United  States,  who  shall  be  in  office  at  the  time 
of  an  annual  election,  shall  be  elected  or  appointed  for  the  next  suc¬ 
ceeding  year;  and  no  director  shall  hold  his  office  more  than  three 
years  out  of  four  in  succession:  but  the  director  who  shall  be  the 


The  directors 
empowered  to 
appoint  officers, 
clerks,  servants, 
etc. 


Fundamental 
articles,  etc. 


Rules  concern¬ 
ing  voting  for  di¬ 
rectors. 


A  part  of  the 
directors  ap¬ 
pointed  by  the 
stockholders  and 
president,  alone 
eligible  a  second 
year,  succes¬ 
sively.  President 
always  eligible. 


7069 — IO - 18 


273 


National  Monetary  Commission 


president  at  the  time  of  an  election  may  always  be  re-appointed  or 
re-elected,  as  the  case  may  be. 

Stockholder  s ,  Third .  None  but  a  stockholder,  resident  citizen  of  the  United  States, 

oniyeDappointed  shall  be  a  director;  nor  shall  a  director  be  entitled  to  any  emoluments; 

rectors^to  have  the  directors  may  make  such  compensation  to  the  president  for 

no  compe  n  s  a  -  his  extraordinary  attendance  at  the  bank,  as  shall  appear  to  them 
tion,  other  than  ,  , 

the  president.  reasonable. 

Seven  direc-  Fourth.  Not  less  than  seven  directors  shall  constitute  a  board  for 
theS’  president  the  transaction  of  business,  of  whom  the  president  shall  always  be 
may  ^constitute  a  one>  except  jn  case  Qf  sickness  or  necessary  absence:  in  which  case  his 
place  may  be  supplied  by  any  other  director  whom  he,  by.  writing, 

How  his  place  under  his  hand,  shall  depute  for  that  purpose.  And  the  director  so 
case  of  absence  deputed  may  do  and  transact  all  the  necessary  business,  belonging 
or  sickness.  to  office  of  the  president  of  the  said  corporation,  during  the  con¬ 
tinuance  of  the  sickness  or  necessary  absence  of  the  president. 

General  meet-  Fifth.  A  number  of  stockholders,  not  less  than  sixty,  who,  together, 
mg  of  the  stock-  ,  ' ,  .  .  ,  ’  ,  J ®  , 

holders — how  to  shall  be  proprietors  of  one  thousand  shares  or  upwards,  shall  have 

be  called.  power  at  any  time  to  call  a  general  meeting  of  the  stockholders  for 

purposes  relative  to  the  institution,  giving  at  least  ten  weeks’  notice 

in  two  public  newspapers  of  the  place  where  the  bank  is  seated,  and 

specifying  in  such  notice  the  object  or  objects  of  such  meeting. 

Cashier  to  give  Sixth.  Each  cashier  or  treasurer,  before  he  enters  upon  the  duties 
bonds  and  secu-  q£  p-g  0ffice>  shall  be  required  to  give  bond,  with  two  or  more  sureties, 
to  the  satisfaction  of  the  directors,  in  a  sum  not  less  than  fifty  thousand 
dollars,  with  a  condition  for  his  good  behaviour  and  the  faithful  per¬ 
formance  of  his  duties  to  the  corporation. 

Limitation  Seventh.  The  lands,  tenements,  and  hereditaments,  which  it  shall 
a°descripfionalof  be  lawful  for  the  said  corporation  to  hold,  shall  be  only  such  as  shall 
vdiich^may^lDe  rectuisite  for  its  immediate  accommodation  in  relation  to  the  con- 
held  by  the  cor-  venient  transacting  of  its  business,  and  such  as  shall  have  been  bona 
poration.  mortgaged  to  it  by  way  of  security,  or  conveyed  to  it  in  satisfac¬ 

tion  of  debts  previously  contracted  in  the  course  of  its  dealings,  or 
purchased  at  sales,  upon  judgments  which  shall  have  been  obtained 
for  such  debts. 

Maximum  of  Eighth.  The  total  amount  of  debts  which  the  said  corporation 
corporation^may  shall  at  any  time  owe,  whether  by  bond,  bill,  note,  or  other  contract, 
tract16  time  C°n  over  an<^  akove  the  debt  or  debts  due  for  money  deposited  in  the  bank, 
shall  not  exceed  the  sum  of  thirty-five  millions  of  dollars,  unless  the 
contracting  of  any  greater  debt  shall  have  been  previously  authorized 

R  e  m  e  d  y  by  law  of  the  United  States.  In  case  of  excess,  the  directors  under 

rectors  under  whose  administration  it  shall  happen,  shall  be  liable  for  the  same  in 

tration  ^'cx-  their  natural  and  private  capacities:  and  an  action  of  debt  may  in 

cess  of  debt  shall  such  case  be  brought  against  them,  or  any  of  them,  their  or  any  of  their 
be  crested 

heirs,  executors,  or  administrators,  in  any  court  of  record  of  the 
United  States,  or  either  of  them,  by  any  creditor  or  creditors  of  the 


274 


The  Second  United  States  Bank 


said  corporation,  and  may  be  prosecuted  to  judgment  and  execution, 
any  condition,  covenant,  or  agreement,  to  the  contrary  notwithstand¬ 
ing.  But  this  provision  shall  not  be  construed  to  exempt  the  said 
corporation  or  the  lands,  tenements,  goods,  or  chattels  of  the  same 
from  being  also  liable  for,  and  chargeable  with,  the  said  excess. 

Such  of  the  said  directors,  who  may  have  been  absent  when  the  said  Directors  ab- 

,  ,  ,  ,  ,  .  sent  or  dissent- 

excess  was  contracted  or  created,  or  who  may  nave  dissented  from  ing  exempted. 

the  resolution  or  act  whereby  the  same  was  so  contracted  or  created, 
may  respectively  exonerate  themselves  from  being  so  liable,  by  forth¬ 
with  giving  notice  of  the  fact,  and  of  their  absence  or  dissent,  to  the 
President  of  the  United  States,  and  to  the  stockholders,  at  a  general 
meeting,  which  they  shall  have  power  to  call  for  the  purpose. 

Ninth.  The  said  corporation  shall  not,  directly  or  indirectly,  deal  in  what  the 
or  trade  in  anything  except  bills  of  exchange  gold  or  silver  bullion,  transact  bush* ess 
or  in  the  sale  of  goods  really  and  truly  pledged  for  money  lent  and  not and  trade- 
redeemed  in  due  time,  or  goods  which  shall  be  the  proceeds  of  its  ■ 
lands.  It  shall  not  be  at  liberty  to  purchase  any  public  debt  what¬ 
soever,  nor  shall  it  take  more  than  at  the  rate  of  six  per  centum  per 


annum  for  or  upon  its  loans  or  discounts. 

Tenth.  No  loan  shall  be  made  by  the  said  corporation,  for  the  use 
or  on  account  of  the  Government  of  the  United  States,  to  an  amount 
exceeding  five  hundred  thousand  dollars,  or  of  any  particular  state  to 
an  amount  exceeding  fifty  thousand  dollars,  or  of  any  foreign  prince 
or  state,  unless  previously  authorized  by  a  law  of  the  United  States. 

Eleventh.  The  stock  of  the  said  corporation  shall  be  assignable  and 
transferable,  according  to  such  rules  as  shall  be  instituted  in  that 
behalf,  by  the  laws  and  ordinances  of  the  same. 

Twelfth.  The  bills,  obligatory  and  of  credit,  under  the  seal  of  the 
said  corporation,  which  shall  be  made  to  any  person  or  persons  shall 
be  assignable  by  endorsement  thereupon,  under  the  hand  or  hands  of 
such  person  or  persons,  and  his,  her,  or  their  executors  or  administra¬ 
tors,  and  his,  her,  or  their  assignee  or  assignees,  and  so  as  absolutely 
to  transfer  and  vest  the  property  thereof  in  each  and  every  assignee 
or  assignees  successively,  and  to  enable  such  assignee  or  assignees* 


Loans  exceed¬ 
ing  certain  sums 
not  to  be  made 
the  United 
States  or  partic¬ 
ular  states,  or 
foreign  states, 
but  by  acts  of 
Congress. 

Rules  to  be 
prescribed  for 
making  the  stock 
assignable. 

The  bills,  obli¬ 
gatory  and  of 
credit,  under  the 
seal  of  the  cor¬ 
poration  ;  how 
assignable. 


and  his,  her,  or  their  executors  or  administrators,  to  maintain  an  action 
thereupon  in  his,  her,  or  their  own  name  or  names:  Provided,  That  Proviso, 
said  corporation  shall  not  make  any  bill,  obligatory,  or  of  credit,  or 


other  obligation  under  its  seal  for  the  payment  of  a  sum  less  than  five 
thousand  dollars.  And  the  bills  or  notes  which  may  be  issued  by 
order  of  the  said  corporation,  signed  by  the  president,  and  counter¬ 
signed  by  the  principal  cashier  or  treasurer  thereof,  promising  the 
payment  of  money  to  any  person  or  persons,  his,  her,  or  their  order, 


or  to  bearer,  although  not  under  the  seal  of  the  said  corporation,  shall 
be  binding  and  obligatory  upon  the  same,  in  like  manner,  and  with 


like  force  and  effect,  as  upon  any  private  person  or  persons,  if  issued 


275 


N  at i on  a  l  M  on  et  ary  Commission 


by  him,  her  or  them,  in  his,  her  or  their  private  or  natural  capacity 
or  capacities,  and  shall  be  assignable  and  negotiable  in  like  manner  as 
if  they  were  so  issued  by  such  private  person  or  persons;  that  is  to  say, 
those  which  shall  be  payable  to  any  person  or  persons,  his,  her  or  their 
order,  shall  be  assignable  by  endorsement,  in  like  manner  and  with 
the  like  effect  as  foreign  bills  of  exchange  now  are;  and  those  which 
are  payable  to  bearer  shall  be  assignable  and  negotiable  by  delivery 
Proviso.  only:  Provided,  That  all  bills  or  notes,  so  to  be  issued  by  said  corpora¬ 
tion,  shall  be  made  payable  on  demand,  other  than  bills  or  notes  for 
the  payment  of  a  sum  not  less  than  one  hundred  dollars  each,  and  pay¬ 
able  to  the  order  of  some  person  or  persons,  which  bills  or  notes  it 


Half  yearly 
dividends  to  be 
made. 

A  statement  of 
the  affairs  of  the 
company  to  be 
laid  before  the 
stockholders. 


Deli  n  q  u  e  n  t 
subscribers  to 
lose  the  benefit 
of  dividends. 


Offices  to  be 
established  in 
the  District  of 
Columbia  and 
the  several 
states  when  au¬ 
thorized  and  re¬ 
quired  by  law 
Proviso. 


shall  be  lawful  for  said  corporation  to  make  payable  at  any  time  not 
exceeding  sixty  days  from  the  date  thereof. 

Thirteenth.  Half  yearly  dividends  shall  be  made  of  so  much  of  the 
profits  of  the  bank  as  shall  appear  to  the  directors  advisable;  and  once 
in  every  three  years  the  directors  shall  lay  before  the  stockholders,  at 
a  general  meeting,  for  their  information,  an  exact  and  particular  state¬ 
ment  of  the  debts  which  shall  have  remained  unpaid  after  the  expira¬ 
tion  of  the  original  credit,  for  a  period  of  treble  the  term  of  that  credit, 
and  of  the  surplus  of  the  profits,  if  any,  after  deducting  losses  and 
dividends.  If  there  shall  be  a  failure  in  the  payment  of  any  part  of 
any  sum  subscribed  to  the  capital  of  the  said  bank  by  any  person,  co¬ 
partnership,  or  body  politic,  the  party  failing  shall  lose  the  benefit  of 
any  dividend  which  may  have  accrued  prior  to  the  time  for  making 
such  payment,  and  during  the  delay  of  the  same. 

Fourteenth.  The  directors  of  the  said  corporation  shall  establish  a 
competent  office  of  discount  and  deposit  in  the  District  of  Columbia 
whenever  any  law  of  the  United  States  shall  require  such  an  establish¬ 
ment;  also  one  such  office  of  discount  and  deposit  in  any  state  in 
which  two  thousand  shares  shall  have  been  subscribed  or  may  be  held, 
whenever,  upon  application  of  the  legislature  of  such  state,  Congress 
may  by  law  require  the  same:  Provided,  the  directors  aforesaid  shall 
not  be  bound  to  establish  such  office  before  the  whole  of  the  capital  of 


the  bank  shall  have  been  paid  up.  And  it  shall  be  lawful  for  the  di¬ 
rectors  of  the  said  corporation  to  establish  offices  of  discount  and 
deposit,  wheresoever  they  shall  think  fit,  within  the  United  States  or 


the  territories  thereof,  and  to  commit  the  management  of  the  said 
offices,  and  the  business  thereof,  respectively,  to  such  persons  and  under 
such  regulations  as  they  shall  deem  proper,  not  being  contrary  to  law 
or  the  constitution  of  the  bank.  Or  instead  of  establishing  such  offices, 
it  shall  be  lawful  for  the  directors  of  the  said  corporation,  from  time  to 
time,  to  employ  any  other  bank  or  banks,  to  be  first  approved  by  the 
Secretary  of  the  Treasury,  at  any  place  or  places  that  they  may  deem 
safe  and  proper,  to  manage  and  transact  the  business  proposed  as  afore¬ 
said,  other  than  for  the  purposes  of  discount,  to  be  managed  and 


276 


The  S  econ  d  u  nite  d  St  a tes  Bank 


transacted  by  such  offices,  under  such  agreements,  and  subject  to  such 
regulations,  as  they  shall  deem  just  and  proper.  Not  more  than  thir¬ 
teen  nor  less  than  seven  managers  or  directors,  of  every  office  established 
as  aforesaid,  shall  be  annually  appointed  by  the  directors  of  the  bank 
to  serve  one  year;  they  shall  choose  a  president  from  their  own  number; 
each  of  them  shall  be  a  citizen  of  the  United  States,  and  a  resident  of 
the  state,  territory,  or  district  wherein  such  office  is  established ;  and 
not  more  than  three-fourths  of  the  said  managers  or  directors,  in  office 
at  the  time  of  an  annual  appointment,  shall  be  re-appointed  for  the  next 
succeeding  year;  and  no  director  shall  hold  his  office  more  than  three 
years  out  of  four,  in  succession;  but  the  president  may  be  always  re¬ 
appointed. 

Fifteenth.  The  officer  at  the  head  of  the  Treasury  Department  of  Secretary  of 
the  United  States  shall  be  furnished,  from  time  to  time,  as  often  as  he  thorTzed S  toy  call 
may  require,  not  exceeding  once  a  week,  with  statements  of  the  amount  statement 
of  the  capital  stock  of  the  said  corporation  and  of  the  debts  due  to  the  not  exceeding  a 
same;  of  the  moneys  deposited  therein;  of  the  notes  in  circulation, Us  concerns.’  °f 
and  of  the  specie  in  hand;  and  shall  have  a  right  to  inspect  such 
general  accounts  in  the  books  of  the  bank  as  shall  relate  to  the  said 
statement:  Provided,  That  this  shall  not  be  construed  to  imply  a  right  Proviso* 
of  inspecting  the  account  of  any  private  individual  or  individuals  with 
the  bank. 


Sixteenth.  No  stockholder,  unless  he  be  a  citizen  of  the  United  No  stockhold- 

States,  shall  vote  in  the  choice  of  directors.  ^  b^ea  United 

States  may  vote 
in  choice  of  di¬ 
rectors. 

Seventeenth.  No  note  shall  be  issued  of  less  amount  than  five  dol-  No  smaller 
.  notes  than  five 

dollars  to  be  is¬ 
sued. 


Sec.  12.  And  be  it  further  enacted,  That  if  the  said  corporation,  or  Penalties  for 
any  person- or  persons,  for  or  to  the  use  of  the  same,  shall  deal  or  trade  oMi^artfcles'in- 
in  buying  or  selling  goods,  wares,  merchandise,  or  commodities  what- terdicted‘ 


soever,  contrary  to  the  provisions  of  this  act,  all  and  every  person 
and  persons  by  whom  any  order  or  direction  for  so  dealing  or  trading 
shall  have  been  given;  and  all  and  every  person  and  persons  who  shall 
have  been  concerned  as  parties  or  agents  therein,  shall  forfeit  and  lose 
treble  the  value  of  the  goods,  wares,  merchandise  and  commodities 
in  which  such  dealing  and  trade  shall  have  been,  one  half  thereof  to 
the  use  of  the  informer,  and  the  other  half  thereof,  to  the  use  of  the 


United  States,  to  be  recovered  in  any  action  of  law  with  costs  of  suit. 

Sec.  13.  And  be  it  further  enacted,  That  if  the  said  corporation  shall  Penalties  for 
advance  or  lend  any  sum  of  money  for  the  use  or  on  account  of  the toans^to^t he 
Government  of  the  United  States,  to  an  amount  exceeding  five  liun-  United  States  or 
dred  thousand  dollars;  or  of  any  particular  state,  to  an  amount  or  to  foreign 
exceeding  fifty  thousand  dollars;  or  of  any  foreign  prince  or  state,  governments- 
(unless  previously  authorized  thereto  by  a  law  of  the  United  States,) 


277 


% 


N  at i on  a  l  M  on  et ary  Commission 


all  and  every  person  and  persons,  by  and  with  whose  order,  agreement, 
consent,  approbation  and  connivance  such  unlawful  advance  or  loan 
shall  have  been  made,  upon  conviction  thereof  shall  forfeit  and  pay, 
for  every  such  offence,  treble  the  value  or  amount  of  the  sum  or  sums 
which  have  been  so  unlawfully  advanced  or  lent;  one-fifth  thereof  to 
the  use  of  the  informer,  and  the  residue  thereof  to  the  use  of  the 
United  States. 


Notes  of  the  Sec.  i 4.  And  be  it  further  enacted,  That  the  bills  or  notes  of  the  said 

bank  receivable  ~  '  ’ 

in  payments  of  corporation  originally  made  payable,  or  which  shall,  have  become 
United  States,  payable  on  demand,  shall  be  receivable  in  all  payments  to  the  United 


until,  &c. 


States,  unless  otherwise  directed  by  act  of  Congress. 


Repealed, 
1836,  ch.  97. 


Sec.  15.  And  be  it  further  enacted,  That  during  the  continuance  of 
this  act,  and  whenever  required  by  the  Secretary  of  the  Treasury,  the 


The  bank  to 
give  the  neces- 
s  a  r  y  facilities 
without  any 
charge,  for  trans¬ 
ferring  the  funds 
of  the  United 
States  to  differ¬ 
ent  quarters. 


said  corporation  shall  give  the  necessary  facilities  for  transferring  the 
public  funds  from  place  to  place,  within  the  United  States,  or  the 
territories  thereof,  and  for  distributing  the  same  in  payment  of  the 
public  creditors,  without  charging  commissions  or  claiming  allowance 
on  account  of  difference  of  exchange,  and  shall  also  do  and  perform 
the  several  and  respective  duties  of  the  commissioners  of  loans  for  the 


several  states,  or  of  any  one  or  more  of  them,  whenever  required  by  law. 

Deposits  of  Sec.  16.  And  be  it  further  enacted.  That  the  deposits  of  the  money 
the  public  mon-  .  ‘  ’  1  J 

eys  to  be  made  of  the  United  States,  in  places  in  which  the  said  bank  and  branches 
its  branches!  or  thereof  may  be  established,  shall  be  made  in  said  bank  or  branches 
•  f^^before  CoiT  there°f,  unless  the  Secretary  of  the  Treasury  shall  at  any  time  other- 
gress  by  the  Sec- wise  order  and  direct;  in  which  case  the  Secretary  of  the  Treasury 
Treasmry°for  ^s  shall  immediately  lay  before  Congress,  if  in  session,  and  if  not,  imme- 
not  being  done,  diately  after  the  commencement  of  the  next  session,  the  reasons  of 
such  order  or  direction. 


c,°-^ ? r,a V 0 n  Sec.  17.  And  be  it  further  enacted,  That  the  said  corporation  shall 
prohibited  from  '  '  r 

suspending  pay-  not  at  any  time  suspend  or  refuse  payment  in  gold  and  silver,  of  any 

by0 being Smade its  notes,  bills  or  obligations;  nor  of  any  moneys  received  upon 

chargeable  with  deposit  in  said  bank,  or  in  any  of  its  offices  of  discount  and  deposit, 
the  payment  of  .  ,  ’  .  J  r 

interest  at  the  And  if  the  said  corporation  shall  at  any  time  refuse  or  neglect  to  pay 

centum  per  an-  on  demand  any  bill,  note  or  obligation  issued  by  the  corporation, 
num-  according  to  the  contract,  promise  or  undertaking  therein  expressed; 

or  shall  neglect  or  refuse  to  pay  on  demand  any  moneys  received 
in  said  bank,  or  in  any  of  its  offices  aforesaid,  on  deposit,  to  the  per¬ 
son  or  persons  entitled  to  receive  the  same,  then,  and  in  every  such 
case,  the  holder  of  any  such  note,  bill,  or  obligation,  or  the  person  or 
persons  entitled  to  demand  and  receive  such  moneys  as  aforesaid,  shall, 
respectively  be  entitled  to  receive  and  recover  interest  on  the  said 
bills,  notes,  obligations  or  moneys  until  the  same  shall  be  fully  paid 
and  satisfied,  at  the  rate  of  twelve  per  centum  per  annum  from  the  time 
Proviso.  of  such  demand  as  aforesaid;  Provided,  That  Congress  may  at  any  time 
hereafter  enact  laws  enforcing  and  regulating  the  recovery  of  the 


278 


The  S  econd  United  States  Bank 


amount  of  the  notes,  bills,  obligations  or  other  debts,  of  which  pay¬ 
ment  shall  have  been  refused  as  aforesaid,  with  the  rate  of  interest 
above  mentioned,  vesting  jurisdiction  for  that  purpose  in  any  courts, 
either  of  law  or  equity,  of  the  courts  of  the  United  States,  or  terri¬ 
tories  thereof,  or  of  the  several  states,  as  they  may  deem  expedient. 

Sec.  18.  And  be  it  further  enacted,  That  if  any  person  shall  falsely  foxing1  counter¬ 
make,  forge,  or  counterfeit,  or  cause  or  procure  to  be  falsely  made,  feiting,  &c. 
forged  or  counterfeited,  or  willingly  aid  or  assist  in  falsely  making, 
forging  or  counterfeiting,  any  bill  or  note  in  imitation  of  or  purporting 
to  be  a  bill  or  note  issued  by  order  of  the  president,  directors,  and  com¬ 
pany  of  the  said  bank,  or  of  any  order  or  check  on  the  said  bank  or  corpo¬ 
ration,  or  any  cashier  thereof;  or  shall  falsely  alter,  or  cause  or  procure 
to  be  falsely  altered,  or  willingly  aid  or  assist  in  falsely  altering  any  bill 
or  note  issued  by  order  of  the  president,  directors,  and  company  of  the 
said  bank,  or  any  order-or  check  on  the  said  bank  or  corporation,  or  any 
cashier  thereof;  or  shall  pass,  utter  or  publish,  or  attempt  to  pass, 
utter  or  publish  as  true  any  false,  forged,  or  counterfeited  bill  or  note 
purporting  to  be  a  bill  or  note  issued  by  order  .of  the  president,  direct¬ 
ors  and  company  of  the  said  bank,  or  any  false,  forged  or  counter¬ 
feited  order  or  check  upon  the  said  bank  or  corporation,  or  any  cashier 
thereof,  knowing  the  same  to  be  falsely  forged  or  counterfeited;  or 
shall  pass,  utter  or  publish,  or  attempt  to  pass,  utter  or  publish  as  true, 
any  falsely  altered  bill  or  note  issued  by  order  of  president,  direct¬ 
ors  and  company  of  the  said  bank,  or  any  falsely  altered  order  or 
check  on  the  said  bank  or  corporation,  or  any  cashier  thereof,  knowing 
the  same  to  be  falsely  altered  with  intention  to  defraud  the  said  cor¬ 
poration  or  any  other  body  politic  or  person;  or  shall  sell,  utter  or 
deliver,  or  cause  to  be  sold,  uttered  or  delivered,  any  forged  or  coun¬ 
terfeited  note  or  bill  in  imitation,  or  purporting  to  be  a  bill  or  note 
issued  by  order  of  the  president  and  directors  of  the  said  bank,  knowing 
the  same  to  be  false,  forged,  or  counterfeited  every  such  person  shall 
be  deemed  and  adjudged  guilty  of  felony,  and  being  thereof  convicted 
by  due  course  of  law  shall  be  sentenced  to  be  imprisoned  and  kept  to 
hard  labour  for  not  less  than  three  years,  nor  more  than  ten  years,  or 
shall  be  imprisoned  not  exceeding  ten  years,  and  fined  not  exceeding 
five  thousand  dollars:  Provided,  That  nothing  herein  contained  shall  Proviso, 
be  construed  to  deprive  the  courts  of  the  individual  states,  of  a  juris¬ 
diction  under  the  laws  of  the  several  states,  over  any  offence  declared 
punishable  by  this  act. 

Sec.  iq.  And  be  it  further  enacted,  That  if  any  person  shall  make  or  F°r  engraving 
engrave,  or  cause,  or  procure  to  be  made  or  engraved,  or  shall  have  in  tude  of  the 
his  custody  or  possession,  any  metallic  plate,  engraved  after  the  simili-  fhe^bank^  any 
tude  of  any  plate  from  which  any  notes  or  bills  issued  by  the  said  plates,  etc. 
corporation  shall  have  been  printed,  with  intent  to  use  such  plate,  or 
to  cause,  or  suffer  the  same  to  be  used,  in  forging  or  counterfeiting  any 


279 


N  at i on  a  l  M  on  et ary  Commission 


of  the  notes  or  bills  issued  by  the  said  corporation;  or  shall  have  in 
his  custody  or  possession,  any  blank  note  or  notes,  bill  or  bills,  engraved 
and  printed  after  the  similitude  of  any  notes  or  bills  issued  by  the  said 
corporation,  with  intent  to  use  such  blanks,  or  cause,  or  suffer  the  same 
to  be  used,  in  forging  or  counterfeiting  any  of  the  notes  or  bills  issued 
by  the  said  corporation;  or  shall  have  in  his  custody  or  possession, 
any  paper  adapted  to  the  making  of  bank  notes  or  bills,  and  similar 
to  the  paper  upon  which  any  notes  or  bills  of  the  said  corporation 
shall  have  been  issued,  with  intent  to  use  such  paper,  or  cause,  or 
suffer  the  same  to  be  used,  in  forging  or  counterfeiting  any  of  the  notes 
or  bills  issued  by  the  said  corporation,  every  such  person,  being  thereof 
Punishment,  convicted,  by  due  course  of  law,  shall  be  sentenced  to  be  imprisoned, 
and  kept  to  hard  labour,  for  a  term  not  exceeding  five  years,  or  shall 
be  imprisoned  for  a  term  not  exceeding  five  years  and  fined  in  a  sum 
not  exceeding  one  thousand  dollars. 

Bonus  to  be  Sec.  20.  And  be  it  further  enacted,  That  in  consideration  of  the 
paid  to  the  .  . 

United  States  exclusive  privileges  and  benefits  conferred  by  this  act,  upon  the  said 
for  this  charter,  the  president,  directors,  and  company  thereof,  shall  pay  to  the 

United  States,  out  of  the  corporate  funds  thereof,  the  sum  of  one 
million  and  five  hundred  thousand  dollars,  in  three  equal  payments; 
that  is  to  say:  five  hundred  thousand  dollars  at  the  expiration  of  two 
years;  five  hundred  thousand  dollars  at  the  expiration  of  three  years; 
and  five  hundred  thousand  dollars  at  the  expiration  of  four  years 
after  the  said  bank  shall  be  organized,  and  commence  its  operations  in 


the  manner  hereinbefore  provided. 


SEC.  21.  And  be  it  further  enacted,  That  no  other  bank  shall  be  estab- 


Congress  to  es¬ 
tablish  no  other  . 

bank  except  in  lished  by  any  future  law  of  the  United  States  during  the  continuance 

Columbia!*1*  °f  °f  the  corporation  hereby  created,  for  which  the  faith  of  the  United 


States  is  hereby  pledged.  Provided,  Congress  may  renew  existing 
charters  for  banks  in  the  District  of  Columbia,  not  increasing  the 


capital  thereof,  and  may  also  establish  any  other  bank  or  banks  in  said 
district,  with  capitals  not  exceeding,  in  the  whole,  six  millions  of  dol¬ 


lars,  if  they  shall  deem  it  expedient.  And  notwithstanding  the  expi¬ 
ration  of  the  term  for  which  the  said  corporation  is  created,  it  shall  be 

Authority  to  lawful  to  use  the  corporate  name,  style,  and  capacity,  for  the  purpose 
use  the  name  of...  ,  _  .  ,  ,  „  .  , 

the  corporation,  of  suits  for  the  final  settlement  and  liquidation  of  the  affairs  and 

years  after  \^e  accounts  of  the  corporation,  and  for  the  sale  and  disposition  of  their 

charter  shall  ex  estate,  real,  personal,  and  mixed :  but  not  for  any  other  purpose,  or  in 

any  other  manner  whatsoever,  nor  for  a  period  exceeding  two  years 

after  the  expiration  of  the  said  term  of  incorporation. 


Limitation  of  Sec.  22.  And  be  it  further  enacted,  That  if  the  subscriptions  and  pay- 
fo^th^ba^k'go-  ments  to  said  bank  shall  not  be  made  and  completed  so  as  to  enable 
rion  int°  opera"  same  to  commence  its  operations,  or  if  the  said  bank  shall  not 
commence  its  operations  on  or  before  the  first  Monday  in  April  next, 


280 


The  Second  United  States  Bank 


then,  and,  in  that  ease,  Congress  may,  at  any  time  within  twelve 
months  thereafter,  declare,  by  law  this  act  null  and  void. 

Sec.  2%.  And  be  it  further  enacted,  That  it  shall,  at  all  times,  be  law-  .  Committees  of 
ful  for  a  committee  of  either  House  of  Congress,  appointed  for  that  Congress  may  in¬ 
purpose,  to  inspect  the  books,  and  to  examine  into  the  proceedings  of  ctc.Ctof  ^ the'bankl 
the  corporation  hereby  created,  and  to  report  whether  the  provisions  For  what  Pur‘ 
of  this  charter  have  been,  by  the  same  violated  or  not;  and  whenever 
any  committee,  as  aforesaid,  shall  find  and  report,  or  the  President  of 
the  United  States  shall  have  reason  to  believe  that  the  charter  has 
been  violated,  it  may  be  lawful  for  Congress  to  direct,  or  the  President 
to  order,  a  scire  facias  to  be  sued  out  of  the  circuit  court  of  the  district 
of  Pennsylvania,  in  the  name  of  the  United  States,  (which  shall  be 
executed  upon  the  president  of  the  corporation  for  the  time  being,  at 
least  fifteen  days  before  the  commencement  of  the  term  of  said  court,) 
calling  on  the  said  corporation  to  show  cause  wherefore  the  charter 
hereby  granted,  shall  not  be  declared  forfeited;  and  it  shall  be  lawful 
for  the  said  court,  upon  the  return  of  the  said  scire  facias,  to  examine 
into  the  truth  of  the  alleged  violation,  and  if  such  violation  be  made 
appear,  then  to  pronounce  and  adjudge  that  the  said  charter  is  forfeited 
and  annulled.  Provided,  however,  Every  issue  of  fact,  which  may  be  Proviso, 
joined  between  the  United  States  and  the  corporation  aforesaid,  shall 
be  tried  by  a  jury.  And  it  shall  be  lawful  for  the  court  aforesaid  to 
require  the  production  of  such  of  the  books  of  the  corporation  as  it 
may  deem  necessary  for  the  ascertainment  of  the  controverted  facts; 
and  the  final  judgment  of  the  court  aforesaid,  shall  be  examinable  in 
the  Supreme  Court,  of  the  United  States  by  writ  of  error,  and  may  be 
there  reversed  or  affirmed,  according  to  the  usages  of  law. 

Approved,  April  io,  1816. 


281 


/ 


Days  and 
hours  of  busi¬ 
ness. 


Deposits. 


Days  of  dis¬ 
count. 


Discounts  and 
accommodation . 


Mode  of  deci¬ 
sion  on  applica¬ 
tion  for  d  i  s  - 
counts. 


Appendix  B. 

Rules  and  Regulations  for  Conducting  the 
Business  of  the  Bank  of  the  United  States. 

[As  revised  in  1833.] 

I. 

The  Bank  shall  be  kept  open  for  the  transaction  of  business,  from 
nine  o’clock  in  the  morning  until  three  o’clock  in  the  afternoon  every 
day  in  the  year,  except  Sundays,  Christmas  day,  the  First  of  January, 
and  the  Fourth  of  July. 

II. 

The  Bank  shall  take  charge  of  the  cash  of  all  such  persons  as  shall 
choose  to  place  it  there,  free  of  expense,  and  shall  keep  it  subject  to 
the  order  of  the  depositor,  payable  at  sight ;  and  shall  also  receive  special 
deposits  of  ingots  of  gold,  bars  of  silver,  wrought  plate  and  other  valu¬ 
able  articles  of  small  bulk,  for  safe  keeping,  at  the  risk  of  the  depositor. 

III. 

All  bills  and  notes  offered  for  discount,  shall  be  delivered  into  Bank 
on  Monday  and  Thursday  in  each  week,  and  laid  before  the  Board  of 
Directors,  on  the  succeeding  Tuesday  and  Friday,  together  with  a 
statement  of  the  funds  and  situation  of  the  Bank;  on  which  days  the 
discounts  shall  be  settled,  and  such  as  shall  be  admitted  shall  be 
passed  to  the  credit  of  the  applicants  on  the  day  on  which  they  are 
discounted,  and  may  be  drawn  for  at  any  time  after  twelve  o’clock; 
and  the  notes  or  bills  not  discounted,  shall  be  returned  at  any  time 
after  twelve  o’clock  of  the  same  day. 

IV. 

Discounts  shall  not  be  made  upon  personal  security  without  two 
responsible  names  (the  firm  of  a  house  being  considered  as  one  name 
only;)  but  if  stock  of  this  bank  funded  debt  of  the  United  States,  or 
such  other  property  as  shall  be  approved  by  the  Board,  be  deposited 
and  pledged  to  an  amount  sufficient  to  secure  the  payment,  with  all 
damages,  one  responsible  name  shall  be  taken. 

V. 

On  each  application  for  discount,  every  Director  who  may  be  pres¬ 
ent,  shall  be  held  to  give  his  opinion  for  or  against  the  same.  And  no 
discount  shall  be  made  without  the  consent  of  three-fourths  of  the 


282 


The  S  econ  d  u  nit ed  States  Bank 


Overdrafts. 


Protest. 


directors  present;  and  all  notes  and  bills  discounted  shall  be  entered 
in  a  book,  to  be  called  the  Credit  Book,  in  such  manner  as  to  discover 
to  the  Board,  at  one  view,  on  each  discount  day,  the  amount  for  which 
any  person  is  indebted  to  the  Bank,  either  as  payer,  discounter,  or 
indorser. 

VI. 

On  every  discount  day,  the  name  of  every  person  who  shall  have 
overdrawn  the  Bank  since  the  last  discount  day,  shall  be  reported  to 
the  Board;  and  no  person  while  he  remains  an  overdrawer,  shall  have 
any  note  or  bill  discounted  at  this  Bank.  And  in  no  instance  will  this 
Bank  give  a  release  or  discharge  to  any  debtor  where  the  debt  arises 
from  an  overdraft.  And  every  officer  who  shall  knowingly  suffer  an 
overdraft  to  be  made  on  the  Bank,  without  communicating  it  to  the 
President  or  Cashier,  shall  be  dismissed  from  the  service  of  the  Bank. 

VII. 

If  any  bill  or  note  belonging  to  this  Corporation,  shall  not  be  paid 
before  the  shutting  of  the  Bank  on  the  last  day  of  grace,  such  bill  or 
note  shall  be  forthwith  protested;  and  while  such  bill  or  note  remains 
unpaid,  no  discount  or  accommodation  shall  be  granted  to  any  drawer, 
acceptor,  or  indorser  of  the  same.  Bills  and  notes  deposited  for  col¬ 
lection,  at  any  time  before  the  commencement  of  the  days  of  grace, 
shall  be  proceeded  with,  as  bills  and  notes  discounted;  unless  the  per¬ 
son  depositing  the  same  shall  otherwise  direct  in  writing;  provided,  that 
in  case  of  non-payment  and  protest,  the  person  lodging  the  same  shall 
pay  the  charges  of  protest. 

VIII. 

Every  person  who  opens  an  account,  and  transacts  business  with  this  Books  of  sig¬ 
natures. 

Bank,  shall  subscribe  his  name  in  a  book,  to  be  kept  for  that  purpose, 
to  be  called  The  book  of  signatures,  and  all  the  persons  who  compose 
any  house,  keeping  any  account  with  this  Bank,  shall  subscribe  their 
names,  and  the  signature  of  the  firm,  in  this  book,  if  residing  in  Phila¬ 
delphia. 

IX. 


No  director,  without  special  authority,  shall  be  permitted  to  inspect  The  cash  ac- 
f  ...  ...  -r,  ,  count  of  indi- 

the  cash  account  of  any  person  with  this  Bank.  viduals  not  to  be 

examined  by  a 

-■£  director. 

The  books  and  accounts  of  the  Bank  shall  be  regularly  balanced  on  Times  for  bal- 
the  first  day  in  January  and  July  in  each  year;  and  the  half-yearly  divi-  books',  etc.  *  6 

dends  shall  be  declared  on  the  first  Monday  in  said  months,  and  pub¬ 
lished  in  at  least  three  of  the  newspapers  in  the  city  of  Philadelphia: — 


283 


/ 


N  at  ion  a  l  M  on  et ary  Commission 


and  the  books  of  transfer  shall  be  shut  for  ten  days  immediately  pre¬ 
ceding  each  of  the  days  appointed  for  declaring  the  half-yearly  divi¬ 
dends. 

,  4  XI. 

Cashier  may  In  all  cases  when  required,  the  Cashier  shall  accept  powers  of  attorney 
dends  on  the  for  receiving  any  interest  or  dividend  due,  or  to  become  due,  on  any 
i^erest^of  ’  ^he  s^ares  in  this  bank,  or  on  any  funded  debt  of  the  United  States  payable 
funded  debt  of  in  Philadelphia;  which  interest  or  dividend  shall  be  held  by  the  Bank, 
States.U  n  * t  e  subject  to  the  order  of  the  proprietor,  free  of  charge. 

XII. 

How  lost  cer-  If  any  person  claims  a  certificate  of  Bank  stock  to  be  issued  in  lieu 
be' renewed^  t0  one  l°st  or  destroyed,  he  shall  make  an  affidavit  of  the  fact,  and  state 
the  circumstances  of  the  loss  or  destruction;  and  he  shall  advertise  in 
one  or  more  of  the  public  newspapers  in  the  city  of  Philadelphia,  for 
the  space  of  six  weeks,  an  account  of  the  loss  or  destruction,  describing 
the  certificate  and  its  number,  calling  on  all  persons  to  show  cause  why 
a  new  certificate  shall  not  issue  in  lieu  of  that  lost ;  and  he  shall  transmit 
to  the  Bank  his  affidavit,  and  the  advertisements  before  mentioned, 
and  give  to  the  Bank  a  bond  of  indemnity,  with  one  or  more  sureties  if 
required,  (in  the  sum  of  two  hundred  dollars,  for  each  share  to  be  re¬ 
newed)  against  any  damage  which  may  arise  from  issuing  the  new  cer¬ 
tificate:  whereupon  the  Cashier  shall,  six  months  after  the  notice  by 
advertisement  as  aforesaid,  issue  a  new  certificate,  of  the  same  number 
and  tenor  with  that  said  to  be  lost  or  destroyed,  and  specifying  that  it 
is  in  lieu  thereof. 

XIII. 

Committees.  A  Committee  on  the  Offices  consisting  of  five  members,  shall  be 
appointed  by  the  President  every  three  months,  who  shall  have  special 
charge  of  the  situation  and  concerns  of  the  several  Offices  and 
Agencies,  with  authority  to  report  such  measures  in  relation  thereto 
as  they  may  deem  beneficial.  The  said  Committee  shall  have  like 
charge  of  all  matters  relating  to  the  nomination  and  election  of 
Directors  for  the  several  Offices. 

A  Committee  on  Exchange  consisting  of  three  members  shall  be 
appointed  at  the  same  time  and  in  like  manner,  who  shall  have  special 
charge  of  all  matters  relating  to  the  operations  of  the  Bank  and  its 
Offices,  in  Foreign  and  Domestic  Exchange  and  Bullion — and  who 
shall  act  as  a  daily  Committee  for  the  purchase  of  Domestic  Exchange 
at  the  Bank. 

A  Committee  on  the  State  of  the  Bank  consisting  of  five  members 
shall  at  the  same  time  be  appointed  by  ballot,  who  shall  have  charge 
of  such  matters  relative  to  the  local  business  of  the  Bank  as  may 
from  time  to  time  be  referred  to  them  by  the  Board;  they  shall  at 


284 


The  S  e  c  on  d  United  States  Bank 


least  once  during  their  time  of  service  examine  and  count  the  dis¬ 
counted  notes,  and  compare  the  amount  thereof  with  the  balance  of 
the  amount  of  bills  discounted  in  the  General  Ledger;  they  shall  also 
count  the  cash,  and  the  printed  and  unprinted  paper  in  the  possession 
of  the  Cashier — examine  the  evidences  of  the  public  debt  and  property 
of  the  Corporation,  make  an  inventory  of  the  same  to  be  compared 
with  the  books  in  order  to  ascertain  their  agreement,  and  report  to 
the  Board. 

XIV. 

Thirty  days’  notice  shall  be  given  by  the  Cashier  in  at  least  two  of  rec^.gtlon  of 
the  daily  newspapers  of  Philadelphia,  of  each  annual  election  for 
Directors  of  the  Bank;  and  within  one  week  preceding  the  same,  the 
Directors  for  the  time  being,  shall  appoint  by  ballot  five  Stockholders, 
not  being  Directors,  to  be  Judges  of  the  election,  who  shall  conduct 
and  regulate  the  same,  commencing  at  ten  o’clock  A.  M.  on  the  first 
Monday  of  January. 

But  in  case  an  election  of  Directors  shall  not  begin,  or  shall  not 
be  completed  on  the  said  first  Monday,  the  Judges  shall  adjourn  the 
same  from  day  to  day,  not  exceeding  five  days,  until  the  said  election 
shall  be  completed. 

The  Judges  shall  on  the  forenoon  of  the  day  after  the  election  shall 
have  been  completed,  at  the  furthest,  transmit  to  the  Cashier  of  the 
Bank,  an  authentic  certificate  of  the  persons  elected:  and  the  Cashier 
shall  thereupon  forthwith  give  notice  to*  all  of  the  said  Directors  who 
shall  be  within  convenient  distance,  to  meet  at  the  Bank  at  six  o’clock 
in  the  evening  of  the  same  day,  for  the  purpose  of  choosing  a  President. 

XV. 

In  every  election  to  an  office  (except  that  of  the  President)  by .  Mod|-  °f  elect- 
this  Board,  there  shall  be  a  previous  nomination  of  the  candidate  the  bank,  etc. 
at  least  one  week  before  the  election:  Provided,  that  such  previous 
nomination  may  be  dispensed  with  by  a  unanimous  vote  of  the 
Directors  present: — and  every  President,  Cashier  and  Assistant  Cashier 
of  this  Bank,  shall  take  and  subscribe,  an  oath  or  affirmation,  to 
the  following  effect, — to  wit: — I  do  swear  ( or  affirm)  that  I  will 

to  the  best  of  my  knowledge  and  abilities,  perform  the  duties  assigned  to, 
and  the  trust  reposed  in  me,  as  of  the  Bank  of  the  United  States. 

XVI. 

It  shall  be  the  duty  of  the  President  to  take  into  his  custody  at  the  Duties  of  the 
Bank,  the  Seal  of  the  Bank  which  he  shall  cause  to  be  affixed  to  all 
instruments  and  documents  when  so  ordered  by  the  Board;  and  to 
sign  all  bills  and  notes  issued  by  the  Corporation. 


285 


N  at i on  a  l  M  on  et ary  Commission 


He  shall  preside  at  all  meetings  of  the  Board,  except  in  cases  of 
necessary  absence,  convene  the  Directors  on  special  occasions,  and 
serve  as  a  member  of  all  committees  of  the  Board. 

XVII. 

cashier^  °f  the  ^  be  duty  °f  the  Cashier  to  countersign  all  bills,  notes, 

certificates  of  stock,  and  bills  of  exchange  to  be  signed  by  the  Presi¬ 
dent,  or  by  order  of  the  Board;  He  shall  take  into  his  custody  at  the 
Bank,  the  plates,  paper-moulds,  bank  note  paper,  unprinted  and 
printed  until  issued,  blank  certificates  of  stock,  and  bills  of  exchange, 
superintend  the  printing  of  whatever  supplies  of  these  may  from  time 
to  time  be  considered  necessary  for  the  use  of  the  Bank  and  Offices; 
keep  a  regular  account  of  all  the  articles  in  his  custody,  which  account 
shall  be  checked  by  quarterly  examinations  by  the  Committee  on  the 
State  of  the  Bank;  he  shall  attend  all  meetings  of  the  Board,  keep  a 
fair  and  regular  record  of  its  proceedings,  furnish  official  extracts  there¬ 
from,  and  give  all  such  information  as  may  be  required  by  the  Board  or 
any  Committee. 

He  shall  correspond  with  the  Officers  of  the  several  Offices,  as  the 
organ  of  the  Board  or  Committees  of  the  Board,  in  directing  the  gen¬ 
eral  operations  of  the  Bank,  in  stock  and  bullion,  and  in  foreign  and 
domestic  exchange;  he  shall  also  correspond  with  the  Agents  of  the 
Bank  in  Europe,  and  with  all  other  persons  doing  business  with  the 
Bank  on  subjects  connected  with  his  department;  he  shall  carefully 
observe  the  conduct  of  all  persons  employed  under  him,  and  report 
to  the  Board  such  instances  of  neglect,  incapacity  or  bad  conduct  as 
he  may  discover  in  any  of  them,  and  generally  shall  perform  all  such 
other  services  as  may  be  required  of  him  by  the  Board. 


Duty  of  the 
first  assistant 
cashier. 


XVIII. 

It  shall  be  the  duty  of  the  First  Assistant  Cashier  to  take  charge  of 
the  local  operations  of  the  Bank  in  Philadelphia  in  the  same  manner 
and  with  the  same  duties,  as  the  Cashiers  of  the  Offices  do  of  the  con¬ 
cerns  of  their  respective  Offices,  except  when  otherwise  provided  by 
the  by-laws  or  directed  by  the  Board ;  carefully  to  observe  the  conduct 
of  all  persons  employed  under  him,  and  report  to  the  President  and 
Cashier  such  instances  of  neglect,  incapacity  or  bad  conduct  as  shall 
come  to  his  knowledge,  daily  to  examine  the  settlement  of  the  cash 
accounts  of  the  Bank,  to  take  charge  of  the  cash,  and  whenever  the 
actual  amount  disagrees  with  the  balance  of  the  cash  account  report 
the  same  to  the  President  and  Cashier  without  delay,  and  generally 
to  perform  such  services  as  shall  be  required  of  him  by  the  Board,  the 
President,  or  the  Cashier. 


286 


The  S  econ  d  u  n  it  ed  States  Bank 


XIX. 

It  shall  be  the  duty  of  the  Second  Assistant  Cashier  to  take  charge  of  on^uty  assistant 
the  general  statements  and  accounts  of  the  Bank;  the  accounts  be- cashier, 
tween  the  several  Offices,  the  accounts  with  the  Government  of  the 
United  States,  the  foreign  exchange  accounts,  and  the  returns  of  all 
foreign  or  domestic  bills  purchased  at  the  Offices.  On  all  these  sub¬ 
jects  he  shall  correspond  with  the  Offices  and  the  parties  concerned, 
under  the  special  superintendence  of  the  President  and  Cashier;  and 
generally  perform  such  other  services  as  may  be  required  by  the  Board 
or  by  the  President  or  Cashier. 

XX. 


It  shall  be  the  duty  of  the  third  Assistant  Cashier  to  take  charge  of  thini^assistant 
the  Suspended  Debt  and  the  Real  Estate  of  the  Bank  and  the  several  cashier. 

Offices,  and  correspond  thereon  with  the  Officers  and  Agents  of  the 
Bank  and  the  Offices,  and  with  other  parties  concerned  under  the 
special  superintendence  of  the  President  and  Cashier,  and  generally 
perform  such  other  services  as  may  be  required  by  the  Board,  or  by  the 
President  or  the  Cashier. 

XXI. 

In  the  election  of  Cashier,  or  of  Assistant  Cashiers,  the  ballots  shall  ierPa°  ^  distant 

be  first  taken  for  all  the  candidates,  and  if  no  one  shall  have  a  majority  cashiers  are  to 

be  elected. 

of  the  votes  of  all  the  Directors  present,  then  the  three  candidates 
having  the  highest  number  shall  be  voted  for  again;  and  if  no  one 
shall  be  elected,  the  ballots  shall  then  be  taken  on  the  two  highest. 

XXII. 

The  Cashier  before  he  enters  upon  the  duties  of  his  office  shall  give  .  Security  to  be 

1  °  given  by  ttie 

bond  to  the  President,  Directors  and  Company,  with  two  or  more  cashier  and 
approved  sureties,  in  the  sum  of  seventy  thousand  dollars,  with  a  condi-  etc.er 
tion  for  his  good  behaviour  and  the  faithful  performance  of  his  duties  to 
the  Corporation.  The  First  Assistant  Cashier,  and  the  Cashier  at  each 
Office,  shall  give  bond  in  like  manner,  in  the  sum  of  fifty  thousand 
dollars,  with  the  same  condition.  The  Second  and  Third  Assistant 
Cashiers  shall  give  bond  in  like  manner  in  the  sum  of  twenty-five  thou¬ 
sand  dollars  with  the  same  condition.  The  paying  and  the  receiving 
Tellers,  in  the  sum  of  twenty  thousand  dollars  each;  The  Book-keepers 
Discount  Clerks,  Note  Clerks,  and  other  Clerks,  in  the  sum  of  five  thou¬ 
sand  dollars  each;  and  the  Porters  in  the  sum  of  two  thousand  dollars 
each,  with  the  same  condition. 


287 


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National  Monetary  Commission 


XXIII. 


Clerks,^  ^etc.,  No  Clerk  or  Porter  in  this  institution  shall  be  permitted  to  have  an 
having  an  ac-  account  with  the  Bank,  but  shall  receive  his  salary  quarterly,  or 
bank1  W'th  the  monthly.  And  every  Clerk  and  servant  of  the  Bank  shall  take,  and 
subscribe,  an  oath  or  affirmation  to  the  following  effect,  to  wit: — 

I -  do  swear  or  ( affirm )  that  I  will  to  the  best  of  my  knowledge  and 

abilities  perform  the  duties  assigned  to,  and  the  trust  reposed  in  me  as 
- of  the  Bank  of  the  United  Stales,  and  keep  secret  the  business  thereof. 


XXIV. 


How^the  P^s-  None  of  the  foregoing  rules  or  regulations  shall  be  repealed  or  altered, 
may  be  altered  unless  a  majority  of  all  the  Directors  vote  for  the  repeal  or  alteration, 
or  repealed.  nor  uniess  Upon  a  motion  offered  for  the  purpose  at  a  previous  meeting. 


XXV 


The  proceedings  of  the  Board  of  Directors,  when  conducting  their 


How  the  pro¬ 
ceedings  of  the 

board  of  direct- business  as  a  deliberative  body,  shall  be  governed  by  the  following- 
ors  are  to  be  .  . 
governed.  article. 

i.  When  the  President  takes  the  chair,  the  members  shall  take  their 


seats. 

2.  The  Discounts  shall  be  settled,  and  the  minutes  of  the  preceding 
meeting  shall  then  be  read,  before  the  Board  proceeds  to  any  other 
business;  and  no  debate  shall  be  admitted,  nor  question  taken,  at 
such  reading,  except  as  to  errors  and  inaccuracies. 

3.  The  President  shall  be  the  judge  of  order,  and  his  decisions  shall 
be  immediately  submitted  to,  unless  two  members  require  an  appeal 
to  the  Board.  Pie  shall  name  all  Committees,  unless  herein  otherwise 
provided,  or  unless  the  Board  shall  otherwise  determine;  and  he  shall 
call  special  meetings  of  the  Board,  whenever  in  his  opinion  the  business 
may  require  it,  or  on  the  request  of  three  members  of  the  Board. 

4.  Every  member  presenting  a  paper  to  the  chair,  shall  first  state 
its  general  purport;  and  every  member  who  shall  make  a  motion,  or 
offer  a  resolution,  or  speak  on  any  subject  under  discussion,  shall  rise 
and  address  the  President. 

5.  No  debate  shall  be  entered  into  on  any  motion  or  resolution, 
until  it  shall  be  stated  from  the  chair;  and  all  motions  shall,  if  re¬ 
quested  by  the  President  or  by  two  members,  be  reduced  to  writing; 
and  no  member  shall  speak  more  than  twice  upon  any  one  question 
without  leave  from  the  Board. 

6.  While  a  resolution  is  under  consideration,  no  motion  shall  be 
made,  except  to  amend,  divide,  commit  or  postpone  it:  But  it  shall 
be  in  order,  at  any  time,  on  the  call  of  three  members,  to  take  the 


288 


The  Second  United  States  Bank 


previous  question,  which  shall  be  “  Will  the  Board  at  this  time  act  on  this 
subject ?”  and  if  it  shall  be  decided  in  the  affirmative,  the  debate  may 
be  continued.  A  motion  to  adjourn,  shall  always  be  in  order,  but 
shall  be  decided  without  debate. 

7.  A  member  may  call  for  the  division  of  a  question  or  resolution 
where  the  sense  will  admit  of  it;  but  no  amendment  which  tends  to 
destroy  the  general  sense  of  the  clause  of  a  resolution  shall  be  admitted. 

8.  If  business  of  different  kinds  shall  be  called  for,  at  the  same  time, 
by  different  members,  the  Board  will  judge  and  give  preference  accord¬ 
ingly. 

9.  The  yeas  and  nays  shall  be  taken  on  any  question,  if  called  for 
by  two  members  previous  to  the  decision  on  such  question;  but  no 
motion  for  reconsideration  shall  be  permitted,  unless  made  and  sec¬ 
onded  by  members  who  were  in  the  majority  on  the  original  question. 

10.  At  the  request  of  any  two  of  the  Board,  the  names  of  the  mem¬ 
bers  who  make  and  second  a  motion  shall  be  entered  on  the  minutes. 


7069 — 10 - 19 


289 


/ 


Appendix  C. 


Rules  and  Regulations  for  the  Government  of  the  Offices 
of  Discount  and  Deposit  Established  by  the  Bank  of  the 
United  States. 


[Printed  by  order  of  the  Board  of  Directors.  1817.] 


Preamble.  Whereas,  by  the  act  incorporating  the  subscribers  to  the  Bank  of 

the  United  States,  the  directors  are  authorized  and  empowered  to 
establish  Offices  of  Discount  and  Deposit  within  the  United  States,  or 
the  Territories  thereof,  subject  to  such  regulations  as  they  shall  deem 
proper,  not  being  contrary  to  law,  or  the  constitution  of  the  Bank; 
therefore,  We,  the  Directors,  by  virtue  of  the  power  and  authority 
vested  in  us,  do  resolve,  that  the  following  rules  and  regulations  be 
established,  for  the  government  of  the  Offices  of  Discount  and  Deposit 
of  the  Bank  of  the  United  States: 


Article  I. 


Directors  of 
Offices,  how  ap¬ 
pointed. 


The  Directors  of  the  Bank  of  the  United  States  shall  annually  appoint 
not  less  than  nine  Directors  for  each  Office,  a  majority  of  whom  shall 
constitute  a  Board. 


Article  II. 


Choose  a  Pres¬ 
ident. 


The  Directors  of  each  Office  shall  choose  one  of 
President. 


their  number  for 


Article  III. 


Duty  of  Presi-  It  shall  be  the  duty  of  the  President  to  preside  at  all  meetings  of 
the  Board,  except  in  cases  of  necessary  absence,  to  convene  the  Direc¬ 
tors  upon  special  occasions,  and  to  give  such  attendance  at  the  Office, 
as  the  interest  of  it  may  require. 


Article  IV. 


Cashiers  of  of-  The  Directors  of  the  Bank  of  the  United  States  shall  appoint  the 

pointed*10^  &P  Cashiers  of  the  Offices  of  Discount  and  Deposit. 


Article  V. 


ier?Uty  °f  Cash'  It  shall  be  the  duty  of  the  Cashier,  carefully  to  observe  the  conduct 
of  all  persons  employed  under  him,  and  report  to  the  Board  such 
instances  of  neglect,  incapacity  or  bad  conduct  as  he  may  discover 
in  any  of  them;  daily  to  examine  the  settlement  of  the  cash  account  of 


290 


V 


The  S  e  con  d  u  nited  States  Bank 


the  office;  take  charge  of  the  cash,  and  whenever  the  actual  amount 
disagrees  with  the  balance  of  the  cash  account,  report  the  same  to 
the  President  and  Directors  without  delay;  to  attend  all  meetings  of 
the  Board;  keep  a  fair  and  regular  record  of  its  proceedings;  give  such 
information  to  the  Board  as  may  be  required;  consult  with  committees 
when  requested,  on  subjects  referred  by  the  Board;  and  also  to  perform 
such  other  services  as  may  be  required  of  him  by  the  Board. 

Article;  VI. 

The  Tellers,  Clerks,  and  Servants  of  the  Offices,  shall  be  appointed  by  &cTeIleh ow  ^ap- 
their  Directors,  and  before  they  enter  on  the  duties  of  their  respective  pointed, 
offices,  bond  shall  be  given  with  sufficient  surety  (to  be  approved  by 
the  Directors)  for  the  faithful  performance  of  the  trust  reposed  in  them. 

Article;  VII. 

No  Teller,  Clerk,  or  Servant,  in  an  Office  shall  be  permitted  to  have  an  ,  permitted 

1  to  have  an  ae- 

account  with  the  same,  but  shall  receive  his  salary,  quarterly  or  monthly,  count  in  the  Of- 
from  the  Cashier;  and  every  Teller,  Clerk,  and  Servant  of  an  Office  shall 
take,  and  subscribe,  an  oath,  or  affirmation,  to  the  following  effect,  to 

wit:  I,  -  - ,  do  swear  (or  affirm)  that  I  will  to  the  best  of 

my  knowledge  and  abilities,  perform  the  duties  assigned,  and  the  trust 

reposed  in  me  as  - of  the  Office  of  Discount  and  Deposit  of  the 

Bank  of  the  United  States,  and  keep  secret  the  business  thereof. 

Article  VIII. 

The  Offices  shall  be  kept  open  for  the  transaction  of  business,  every  c  DVect1ors  to. 

r  v  J  nx  the  hours  of 

day  in  the  year,  during  such  hours  as  the  Directors  thereof  may  deter-  business, 
mine,  except  Sundays,  Christmas  day,  the  first  of  January,  and  the 
fourth  of  July. 

Article  IX. 

The  books  and  accounts  of  the  Offices  shall  be  regularly  balanced  on  Books  to  be 

balanced 

the  first  day  of  June  and  the  first  day  of  December,  in  each  year. 

Article  X. 

The  Offices  shall  take  charge  of  the  cash  of  all  such  persons  as  shall  Deposits, 
choose  to  place  it  with  them,  free  of  expense,  and  shall  keep  it  subject  to 
the  order  of  the  depositor,  payable  at  sight;  and  shall  also  receive  spe¬ 
cial  deposits  of  ingots  of  Gold,  bars  of  Silver,  wrought  plate,  and  other 
valuable  articles  of  small  bulk,  for  safe  keeping,  at  the  risque  of  the 
depositor. 

Article  XI. 

The  Offices  shall  receive  and  pay  all  specie  coins,  according  to  the  Rates  of  Coins, 
rates  and  value,  that  have  been  or  shall  be  established  by  Congress. 


291 


National  Monetary  Commission 


Article  XII. 


Day  of  Dis-  There  shall  be  at  least  one  Discount  day  in  each  week,  when  the  Di- 
unt. 

rectors  shall  be  assembled;  a  majority  of  the  members  shall  be  required 
to  form  a  quorum,  except  for  the  purpose  of  settling  Discounts,  for 
which  five  shall  constitute  a  quorum,  and  no  bill  or  note  shall  be  dis¬ 
counted  the  unexpired  term  of  which  exceeds  sixty  days. 

Article  XIII. 


President  may 
nominate  a  sub¬ 
stitute. 


In  case  of  sickness  or  necessary  absence  of  the  President,  such  other 
Director  shall  preside  as  he  shall  by  writing  nominate,  or  in  case  of 


omission  of  such  nomination,  by  such  other  Director  as  the  Board  may 


for  that  purpose  appoint. 


Article  XIV. 


Statement  of  All  Bills  and  Notes  offered  for  Discount,  shall  be  laid  before  the  Board 
funds  to  be  made  .  . 

on  days  of  Dis-  of  Directors  by  the  Cashier  on  the  days  assigned  for  Discount,  together 
count-  with  a  statement  of  the  funds  and  situation  of  the  Office,  for  their  infor¬ 

mation. 


Article  XV. 


Discounts  and  Discounts  shall  not  be  made  upon  personal  security  without  two  re- 
aceommodation.  1  1  J 

sponsible  names  (the  firm  of  a  house  being  considered  as  one  name 
only;)  but  if  Stock  of  the  Bank  of  the  United  States,  Funded  Debt  of 
the  United  States,  or  such  other  property  as  shall  be  approved  by  the 
Board,  be  deposited  and  pledged  to  an  amount  sufficient  to  secure  the 
payment,  with  all  damages,  one  responsible  name  may  be  taken.  But 
no  accommodation  note  (i.  e.,  a  note,  the  proceeds  of  which  are  to  be 
placed  to  the  credit  of  the  drawer)  shall  be  discounted,  unless  its  pay¬ 
ment  be  secured  by  a  deposit  of  the  Stock  of  this  Bank  or  of  Funded 
Debt  of  the  United  States,  or  such  other  property  as  shall  be  approved 
by  the  Board  together  with  an  express  authority  to  the  Bank  to  sell  the 
Deposit  in  case  of  non-payment  at  any  time  after  the  Note  shall  become 
due. 

Article  XVI. 


Mode  of  de-  On  each  application  for  discount,  every  Director  who  may  be  present, 
cision  on  appli-  1  1  ....  . 

cation  for  Dis-  shall  be  held  to  give  his  opinion  for  or  against  the  same.  And  no  Dis- 
count'  count  shall  be  made  without  the  consent  of  three  fourths  of  the  Direct¬ 

ors  present;  and  all  notes  and  bills  discounted  shall  be  entered  in  a 
book,  to  be  called  The  Credit  Book,  in  such  manner  as  to  discover  to 
the  Board,  at  one  view,  on  each  Discount  day,  the  amount  which  any 
person  is  discounter,  or  is  indebted  to  the  Office,  either  as  payer  or  as 
indorser. 


292 


V 


The  Second  U  n  it ed  States  Bank 


Article  XVII. 

On  every  Discount  day,  the  name  of  every  person  who  shall  have  Overdrafts, 
overdrawn  the  Office  since  the  last  Discount  day  shall  be  reported  to 
the  Board;  and  no  person  while  he  remains  an  overdrawer,  shall  have 
any  note  or  bill  discounted  by  the  Offices.  And  in  no  instance  will 
this  Bank  give  a  release  or  discharge  to  any  debtor  when  the  debt 
arises  from  an  overdraft.  And  every  officer  who  shall  knowingly 
suffer  an  overdraft  to  be  made  on  the  Office,  without  communicating 
it  to  the  President  and  Cashier,  shall  be  dismissed  from  the  service  of 
the  office. 

Article  XVIII. 

If  any  Bill  or  Note  belonging  to  the  Bank,  shall  not  be  paid  before  Protests, 
the  shutting  of  the  Office  on  the  last  day  of  grace,  each  bill  or  note 
shall  be  forthwith  protested ;  and  while  such  bill  or  note  remains  unpaid, 
no  discount  or  accommodation  shall  be  granted  to  any  drawer,  acceptor, 
or  indorser  of  the  same.  Bills  and  notes  deposited  for  collection,  at 
any  time  before  the  commencement  of  the  days  of  grace,  shall  be  pro¬ 
ceeded  with  as  bills  and  notes  discounted;  unless  the  person  depositing 
the  same  shall  otherwise  direct  in  writing:  provided  that  in  case  of 
non-payment  and  protest,  the  person  lodging  the  same  shall  pay  the 
damages  of  protest. 

Article  XIX. 

Every  person  who  opens  an  account,  and  transacts  business  with  an '  Book  of  signa- 
Office,  shall  subscribe  his  name  in  a  book,  to  be  kept  for  that  purpose, 
to  be  called  The  Book  of  Signatures ;  and  all  the  persons  who  compose 
any  house,  keeping  an  account  with  an  Office  shall  subscribe  their  names, 
and  the  signatures  of  the  firm,  in  the  book,  if  residing  in  the  place  where 
the  Office  is  established. 

Article  XX 

No  Director,  without  special  authority,  shall  be  permitted  to  inspect  fCash  account 

the  cash  account  of  any  person  with  the  Office.  not  to  be  exam¬ 

ined  by  a  Direc- 

Article.  XXI.  tor> 

A  Committee  on  the  state  of  the  Office,  shall  be  appointed  by  ballot  Committee  to 

’  J  examine  and  re- 

every  three  months  to  examine  and  count  the  discounted  notes,  and  port  on  the  state 

compare  the  amount  thereof  with  the  balance  of  the  amount  of  bills  °f  the  office' 

discounted  in  the  general  ledger;  they  shall  also  count  the  cash,  and 

examine  the  evidences  of  the  other  property  of  the  Bank,  and  make  an 

inventory  of  the  same  to  be  compared  with  the  books  in  order  to 

ascertain  their  agreement,  and  make  report  to  the  Board. 


293 


National  Monetary  Commission 


Article  XXII. 

Presidentsand  The  Presidents  and  Cashiers  of  Offices,  shall  take,  and  subscribe  an 

fices  to  subscribe  oath,  or  affirmation  to  the  following  effect,  to  wit:  I, - , 

an  oath.  do  swear  (or  afftrm)  that  I  will,  to  the  best  of  my  knowledge  and  abili¬ 

ties,  perform  the  duties  assigned  to,  and  the  trust  reposed  in  me  as 

- of  the  Office  of  Discount  and  Deposit  of  the  Bank  of  the  United 

States. 

Article  XXIII. 

Only  notes  and  All  Notes  and  Bills  receivable  at  an  Office,  shall  be  paid  in  Specie,  or 
bills  redeemable  , 

with  specie  to  be  in  the  Notes  of  the  Office,  or  in  the  Notes  of  such  Banks  established  in 
positTed  m  dt  the  same  place  with  the  Office,  as  redeem  their  Notes  to  bearer,  with 
Specie  on  demand. 

Article  XXIV. 

A?d  AT  pay'  The  Offices  of  Discount  and  Deposit  shall  receive  in  payment  of  the 

ment  of  the  rev-  t  r  1  J 

enue  of  the  u.s.  revenue  of  the  United  States,  the  Notes  of  such  State  Banks  as  redeem 

their  engagements  with  Specie,  and  provided  they  are  the  Notes  of 
Banks  located  in  the  city,  or  place,  where  the  Office  receiving  them  is 
established.  And  also  the  Notes  of  such  other  Banks  as  a  special  de¬ 
posit  on  behalf  of  the  Government,  as  the  Secretary  of  the  Treasury 
may  require. 

Article  XXV. 


Offices  to  set-  The  Offices  of  Discount  and  Deposit  shall  at  least  once  every  week, 
a  week  with  settle  with  the  State  Banks  for  their  Notes,  received  in  payment  of  the 
other  Banks.  revenue,  or  for  the  engagements  of  individuals  to  the  Bank,  so  as  to 
prevent  the  balances  due  to  the  Office  from  swelling  to  an  inconvenient 
amount. 

Article  XXVI. 

officesTo^e  kept  ^he  manner  of  keeping,  stating,  and  rendering  the  accounts  of  the 
stated  and  ren-  Offices  shall  be  prescribed  by  the  Directors  of  the  Bank  of  the  United 
scribed  Ay  PDi-  States,  and  the  observance  of  the  rules  established  and  instructions 
rectorsofB. u.S.  given  shall  be  enforced  by  the  Directors  of  the  Bank  of  the  United 
States,  to  whom  accounts  of  the  Offices  shall  be  rendered. 

Article  XXVII. 


The  respective  Offices,  shall  once  in  every  week,  make  out  and  trans- 


Offices  once  a 
week  to  trans¬ 
mit  to  Bank  of  mit  to  the  Directors  of  the  Bank  of  the  United  States,  a  distinct  abstract 

abstract  of  their  °f  the  state  of  their  funds;  which  abstract  shall  ascertain  the  amount 
funds.  Gf  the  debts  and  credits  of  the  Office,  amount  of  Notes  issued  by  the 

Office,  and  then  in  circulation,  the  amount  of  cash  on  hand;  and  shall 
likewise  distinguish  in  the  account  of  cash  on  hand,  how  much  thereof, 
is  in  specie,  and  how  much  in  the  several  kinds  of  Bank  notes,  designat¬ 
ing  the  notes  of  the  parent  Bank  and  those  of  each  Office  particularly. 


294 


The  Sec  ond  u  nited  States  Bank 


Article  XXVIII. 

All  notes  issued  from  the  Offices  shall  be  delivered  to  their  respective  c  Cashiers  of  Of- 

r  m  rices  to  give  du- 

Cashiers,  who  shall  give  duplicate  receipts  for  the  same,  one  of  which  plicate  receipts 
is  to  be  lodged  with  the  President  of  the  Bank  of  the  United  States, for  notes  issued 
and  the  other  with  the  President  of  the  Office. 

Article  XXIX. 


All  Notes  which  shall  have  become  unfit  for  circulation,  shall  be  can-  .  Notes  unfit  for 

circulation  to  be 

celled  by  the  President  and  Directors  of  the  Office,  and  immediately  cancelled, 
thereafter  transmitted  to  the  Directors  of  the  Bank  of  the  United 
States,  who  shall  cause  the  said  Office  to  be  credited  with  the  same. 


Article  XXX. 

The  Cashier  of  each  Office  shall  give  bond  to  the  President,  Directors,  ~  Cashiers  of  of- 

°  >  rices  to  give 

and  Company  of  the  Bank  of  the  United  States  with  two  or  more  ap-  Bond, 
proved  securities,  in  the  sum  of  fifty  thousand  dollars,  with  a  condition 
for  his  good  behaviour,  and  the  faithful  performance  of  his  duties  to 
the  Corporation. 

Article  XXXI. 

The  Directors  of  the  Offices  shall  be  empowered  to  form  and  establish  0{^\irec*orfs  of 
all  other  Rules  and  Regulations  for  the  interior  management  of  the  rules  for  their  in- 
Offices:  Provided,  the  same  be  not  repugnant  to  law,  or  to  the  Rules  manage* 

and  Regulations  of  the  Bank  of  the  United  States,  or  the  Resolutions 
of  the  Directors  thereof. 


i 


295 


Appendix  D. 

The  Biee  to  Continue  the  Charter,  which  was 
Vetoed  by  President  Jackson. 


Be  it  enacted  by  the  Senate  and  House  of  Representatives  of  the  United 
States  of  America  in  Congress  assembled,  That  the  act  entitled  “  An  act  to 
incorporate  the  subscribers  to  the  Bank  of  the  United  States,”  approved 
on  the  tenth  day  of  April,  in  the  year  one  thousand  eight  hundred  and  six¬ 
teen,  shall  continue  in  full  force  and  effect  for  the  term  of  fifteen  years  from 
and  after  the  period  therein  limited  for  its  expiration,  to  wit,  the  third  day 
of  March,  in  the  year  one  thousand  eight  hundred  and  thirty-six;  and  that 
all  the  rights,  interests,  properties,  powers  and  privileges,  secured  by  the  said 
act,  with  all  the  rules,  conditions,  restrictions,  and  duties,  therein  prescribed 
and  imposed,  be  and  remain  after  the  said  third  day  of  March,  in  the  year  one 
thousand  eight  hundred  and  thirty-six,  during  the  said  fifteen  years,  as  if 
the  said  limitation  in  the  said  act  had  not  been  made;  subject,  neverthe¬ 
less,  to  the  modifications  and  changes  hereinafter  expressed. 

SEC.  2.  And  be  it  further  enacted,  That  the  directors  of  the  said  corpora¬ 
tion  shall  have  power  to  appoint  two  or  more  officers,  with  authority  to 
sign  and  countersign  any  or  all  the  notes  thereof,  the  denomination  of  each 
of  which  shall  be  less  than  one  hundred  dollars;  which  notes,  when  signed 
and  countersigned  by  the  said  officers,  respectively,  shall,  to  all  intents  and 
purposes,  be  binding  and  obligatory  upon  the  said  corporation  as  if  the  same 
had  been  signed  by  the  President,  and  countersigned  by  the  principal  Cash¬ 
ier  or  Treasurer  thereof;  and  it  shall  be  the  duty  of  the  directors  of  the  said 
corporation  to  make  known,  in  writing,  and  as  soon  as  may  be,  to  the  Sec¬ 
retary  of  the  Treasury,  the  names  of  the  officers  who  shall  be  appointed  by 
virtue  of  this  provision:  Provided,  That  from  and  after  the  third  day  of 
March  one  thousand  eight  hundred  and  thirty-six,  no  branch  bank  draft,  or 
other  bank  paper  not  payable  at  the  place  where  issued,  shall  be  put  in 
circulation,  as  currency,  by  the  bank,  or  any  of  its  offices,  except  notes 
of  the  denomination  of  fifty  dollars,  or  of  some  greater  sum. 

Sec.  3.  And  be  it  further  enacted,  That  it  shall  not  be  lawful  for  the 
said  corporation  to  issue,  pay  out,  or  put  in  circulation,  any  note  or  notes 
of  a  denomination  less  than  fifty  dollars,  which  shall  not,  upon  the  faces 
thereof,  respectively,  be  payable  at  the  bank  or  office  of  discount  and 
deposite  whence  they  shall  be  issued,  paid  out,  or  put  in  circulation. 


296 


The  S  e.cond  United  States  Bank 


SEC.  4.  And  be  it  further  enacted,  That  the  notes  or  bills  of  the  said  cor¬ 
poration,  although  the  same  be,  upon  the  faces  thereof,  respectively,  made 
payable  at  one  place  only,  shall,  nevertheless,  be  received  by  the  said 
corporation  at  the  bank,  or  at  any  of  the  offices  of  discount  and  deposite 
thereof,  if  tendered  in  liquidation  or  payment  of  any  balance  or  balances 

due  to  said  corporation,  or  to  such  office  of  discount  and  deposite,  from 

» 

any  other  incorporated  bank. 

Sec.  5.  And  be  it  further  enacted ,  That  it  shall  not  be  lawful,  after  the 
said  third  day  of  March,  in  the  year  one  thousand  eight  hundred  and 
thirty-six,  for  the  said  corporation  to  hold,  keep,  and  retain,  for  a  period 
exceeding  five  years  after  the  date  of  acquiring  the  same,  any  right,  title, 
or  interest,  except  by  way  of  mortgage  or  judgment  lien  in  security  of 
debts,  to  any  lands,  tenements,  hereditaments,  other  than  those  requisite 
for  its  accommodation  in  relation  to  the  convenient  transacting  of  its  busi¬ 
ness;  and  it  shall  be  the  duty  of  said  corporation,  within  the  aforesaid 
period  of  five  years,  to  sell,  dispose  of,  or  otherwise  bona  fide  divest  itself 
of  all  right,  title,  and  interest  to  any  lands,  tenements  and  hereditaments, 
conveyed  to  it  in  satisfaction  of  debts  previously  contracted  in  the  course 
of  its  dealings,  or  purchased  at  sales  upon  judgments  which  shall  have 
been  obtained  for  such  debts;  and  for  any  and  every  violation  of  this 
provision,  the  said  corporation  shall  be  subject  to  a  penalty  of  ten  thou¬ 
sand  dollars,  to  be  recovered  in  the  name  of  the  United  States  of  America, 
by  a  qui-tam  action  of  debt  instituted  in  any  court  of  the  United  States 
having  jurisdiction  of  the  same;  one  half  of  which  shall  enure  to  the 
benefit  of  the  informer,  and  the  other  half  to  the  use  of  the  United  States. 

Sec.  6.  And  be  it  further  enacted,  That  from  and  after  the  said  tenth  day 
of  April,  in  the  year  one  thousand  eight  hundred  and  thirty-six,  it  shall 
not  be  lawful  for  the  directors  of  the  said  corporation  to  have,  establish  or 
retain,  more  than  two  offices  of  discount  and  deposite  in  any  State:  Pro¬ 
vided,  That  nothing  herein  contained  shall  prevent  the  said  corporation 
from  retaining  any  of  the  branches  which  are  now  established. 

Sec.  7.  And  be  it  further  enacted,  That,  in  consideration  of  the  exclusive 
benefits  and  privileges  continued  by  this  act  to  the  said  corporation  for 
fifteen  years  as  aforesaid,  the  said  corporation  shall  pay  to  the  United 
States  the  annuity  or  yearly  sum  of  two  hundred  thousand  dollars;  which 
said  sum  shall  be  paid  on  the  fourth  day  of  March  in  each  and  every  year, 
during  the  said  term  of  fifteen  years. 

SEC.  8.  And  be  it  further  enacted,  That  it  shall  be  lawful  for  Congress  to 
provide,  by  law,  that  the  said  bank  shall  be  restrained,  at  any  time  after 
the  third  day  of  March,  in  the  year  one  thousand  eight  hundred  and  thirty- 
six,  from  making,  issuing,  or  keeping  in  circulation,  any  notes  or  bills  of 
said  bank,  or  any  of  its  offices,  of  a  less  sum  or  denomination  than  twenty 
dollars. 

Sec.  9.  And  be  it  further  enacted,  That  the  Cashier  of  the  bank  shall, 
annually,  report  to  the  Secretary  of  the  Treasury  the  names  of  all  stock- 


297 


N  at  ion  a  l  M  on  et  a  r  y  Commission 


holders  who  are  not  resident  citizens  of  the  United  States;  and,  on  appli¬ 
cation  of  the  Treasurer  of  any  State,  shall  make  out  and  transmit  to  such 
Treasurer  a  list  of  stockholders  residing  in,  or  citizens  of,  such  State,  with 
the  amount  of  stock  owned  by  each. 

Sec.  io.  And  be  it  further  enacted,  That  so  much  of  any  act  or  acts  of 
Congress  heretofore  passed,  and  now  in  force,  supplementary  to,  or  in 
anywise  connected  with,  the  said  original  act  of  incorporation,  approved 
on  the  tenth  day  of  April,  in  the  year  one  thousand  eight  hundred  and 
sixteen,  as  is  not  inconsistent  with  this  act,  shall  be  continued  in  full  force 
and  effect  during  the  said  fifteen  years  after  the  said  third  day  of  March, 
in  the  year  one  thousand  eight  hundred  and  thirty-six. 

Sec.  ii.  And  be  it  further  enacted,  That  it  shall  be  the  duty  of  the  Presi¬ 
dent  and  directors  of  the  said  bank,  on  or  before  the  first  day  of  the  next 
session  of  Congress,  to  signify  to  the  President  of  the  United  States  their 
acceptance,  on  behalf  of  the  Bank  of  the  United  States,  of  the  terms  and 
conditions  in  this  act  contained;  and  if  they  shall  fail  to  do  so  on  or  before 
the  day  above  mentioned,  that  then  this  act  shall  cease  to  be  in  force. — 
Senate  Journal,  22d  Cong.,  i  sess.,  pp.  451-453,  July  11,  1832. 


298 


Appendix  E. 


Veto  Message  op  President  Jackson,  Judy  io,  1832. 

To  the  Senate: 

The  bill  “to  modify  and  continue”  the  act  entitled  “An  act  to  incor¬ 
porate  the  subscribers  to  the  Bank  of  the  United  States”  was  presented 
to  me  on  the  4th  July  instant.  Having  considered  it  with  that  solemn 
regard  to  the  principles  of  the  Constitution  which  the  day  was  calculated 
to  inspire,  and  come  to  the  conclusion  that  it  ought  not  to  become  a  law, 
I  herewith  return  it  to  the  Senate,  in  which  it  originated,  with  my 
objections. 

A  bank  of  the  United  States  is  in  many  respects  convenient  for  the 
Government  and  useful  to  the  people.  Entertaining  this  opinion,  and 
deeply  impressed  with  the  belief  that  some  of  the  powers  and  privileges 
possessed  by  the  existing  bank  are  unauthorized  by  the  Constitution, 
subversive  of  The  rights  of  the  States,  and  dangerous  to  the  liberties  of 
the  people,  I  felt  it  my  duty  at  an  early  period  of  my  Administration  to 
caH  the  attention  of  Congress  to  the  practicability  of  organizing  an  insti¬ 
tution  combining  all  its  advantages  and  obviating  these  objections.  I 
^sincerely  regret  that  in  the  act  before  me  I  can  perceive  none  of  Those 
modi hcations  oT  the  bank  charter  which  are  necessary,  in  my  opinion,  to 
make  it  compatible  with  justice,  with  sound  policy,  or  with  the  Constitu¬ 
tion  of  our  country. 

The  present  corporate  body,  denominated  the  president,  directors,  and 
company  of  the  Bank  of  the  United  States,  will  have  existed  at  the  time 
this  act  is  intended  to  take  effect  twenty  years.  It  enjoys  an  exclusive 
privilege  of  banking  under  the  authority  of  the  General  Government,  a 
monopoly  of  its  favor  and  support,  and,  as  a  necessary  consequence,  almost 
a  monopoly  of  the  foreign  and  domestic  exchange.  The  powers,  privileges, 
and  favors  bestowed  upon  it  in  the  original  charter,  by  increasing  the 
value  of  the  stock  far  above  its  par  value,  operated  as  a  gratuity  of  many 
millions  to  the  stockholders. 

An  apology  may  be  found  for  the  failure  to  guard  against  this  result 
in  the  consideration  that  the  effect  of  the  original  act  of  incorporation 
could  not  be  certainly  foreseen  at  the  time  orf  its  passage.  The  act  before 
me  proposes  another  gratuity  to  the  holders  of  the  same  stock,  and  in 
many  cases  to  the  same  men,  of  at  least  seven  millions  more.  This  dona¬ 
tion  finds  no  apology  in  any  uncertainty  as  to  the  effect  of  the  act.  On 
all  hands  it  is  conceded  that  its  passage  will  increase  at  least  20  or  30  per 
cent  more  the  market  price  of  the  stock,  subject  to  the  payment  of  the 
annuity  of  $200,000  per  year  secured  by  the  act,  thus  adding  in  a  moment 
one-fourth  to  its  par  value.  It  is  not  our  own  citizens  only  who  are  to 


299 


N  at i o n a  l  M  o  net  ary  Commission 


receive  the  bounty  of  our  Government.  More  than  eight  millions  of  the 
stock  of  this  bank  are  held  by  foreigners.  By  this  act  the  American 
Republic  proposes  virtually  to  make  them  a  present  of  some  millions  of 
dollars.  For  these  gratuities  to  foreigners  and  to  some  of  our  own 
opulent  citizens  the  act  secures  no  equivalent  whatever.  They  are  the 
certain  gains  of  the  present  stockholders  under  the  operation  of  this 
act,  after  making  full  allowance  for  the  payment  of  the  bonus. 

Every  monopoly  and  all  exclusive  privileges  are  granted  at  the  expense 
of  the  public,  which  ought  to  receive  a  fair  equivalent-.  The  many  millions 
which  this  act  proposes  to  bestow  on  the  stockholders  of  the  existing  bank 
must  come  directly  or  indirectly  out  of  the  earnings  of  the  American  people. 
It  is  due  to  them,  therefore,  if  their  Government  sell  monopolies  and  exclu¬ 
sive  privileges,  that  they  should  at  least  exact  for  them  as  much  as  they  are 
worth  in  open  market.  The  value  of  the  monopoly  in  this  case  may  be 
correctly  ascertained.  The  twenty-eight  millions  of  stock  would  probably 
be  at  an  advance  of  50  per  cent,  and  command  in  market  at  least  $42,000,000, 
subject  to  the  payment  of  the  present  bonus.  The  present  value  of  the 
monopoly,  therefore,  is  $17,000,000,  and  this  the  act  proposes  to  sell  for 
three  millions,  payable  in  fifteen  annual  installments  of  $200,000  each. 

It  is  not  conceivable  how  the  present  stockholders  can  have  any  claim  to 
the  special  favor  of  the  Government.  The  present  corporation  has  enjoyed 
its  monopoly  during  the  period  stipulated  in  the  original  contract.  If  we 
must  have  such  a  corporation,  why  should  not  the  Government  sell  out  the 
whole  stock  and  thus  secure  to  the  people  the  full  market  value  of  the  priv¬ 
ileges  granted?  Why  should  not  Congress  create  and  sell  twenty-eight 
millions  of  stock,  incorporating  the  purchasers  with  all  the  powers  and 
privileges  secured  in  this  act  and  putting  the  premium  upon  the  sales  into 
the  Treasury? 

But  this  act  does  not  permit  competition  in  the  purchase  of  this  monop¬ 
oly.  It  seems  to  be  predicated  on  the  erroneous  idea  that  the  present 
stockholders  have  a  prescriptive  right  not  only  to  the  favor  but  to  the 
bounty  of  the  Government.  It  appears  that  more  than  a  fourth  part  of  the 
stock  is  held  by  foreigners  and  the  residue  is  held  by  a  few  hundred  of  our 
own  citizens,  chiefly  of  the  richest  class.  For  their  benefit  does  this  act 
exclude  the  whole  American  people  from  competition  in  the  purchase  of 
this  monopoly  and  dispose  of  it  for  many  millions  less  than  it  is  worth. 
This  seems  the  less  excusable  because  some  of  our  citizens  not  now  stock¬ 
holders  petitioned  that  the  door  of  competition  might  be  opened,  and 
offered  to  take  a  charter  on  terms  much  more  favorable  to  the  Govern¬ 
ment  and  country. 

But  this  proposition,  although  made  by  men  whose  aggregate  wealth 
is  believed  to  be  equal  to  all  the  private  stock  in  the  existing  bank,  has  been 
set  aside,  and  the  bounty  of  our  Government  is  proposed  to  be  again  be¬ 
stowed  on  the  few  who  have  been  fortunate  enough  to  secure  the  stock  and 
at  this  moment  wield  the  power  of  the  existing  institution.  I  can  not  per- 


300 


The  Second  United  States  Bank 


ceive  the  justice  or  policy  of  this  course.  If  our  Government  must  sell  mo¬ 
nopolies,  it  would  seem  to  be  its  duty  to  take  nothing  less  than  their  full 
value,  and  if  gratuities  must  be  made  once  in  fifteen  or  twenty  years  let 
them  not  be  bestowed  on  the  subjects  of  a  foreign  government  nor  upon  a 
designated  and  favored  class  of  men  in  our  own  country.  It  is  but  justice 
and  good  policy,  as  far  as  the  nature  of  the  case  will  admit,  to  confine  our 
favors  to  our  own  fellow-citizens,  and  let  each  in  his  turn  enjoy  an  oppor¬ 
tunity  to  profit  by  our  bounty.  In  the  bearings  of  the  act  before  me  upon 
these  points  I  find  ample  reasons  why  it  should  not  become  a  law. 

It  has  been  urged  as  an  argument  in  favor  of  rechartering  the  present 
bank  that  the  calling  in  its  loans  will  produce  great  embarrassment  and 
distress.  The  time  allowed  to  close  its  concerns  is  ample,  and  if  it  has  been 
well  managed  its  pressure  will  be  light,  and  heavy  only  in  case  its  manage¬ 
ment  has  been  bad.  If,  therefore,  it  shall  produce  distress,  the  fault  will 
be  its  own,  and  it  would  furnish  a  reason  against  renewing  a  power  which 
has  been  so  obviously  abused.  But  will  there  ever  be  a  time  when  this 
reason  will  be  less  powerful?  To  acknowledge  its  force  is  to  admit  that  the 
bank  ought  to  be  perpetual,  and  as  a  consequence  the  present  stockholders 
and  those  inheriting  their  rights  as  successors  be  established  a  privileged 
order,  clothed  both  with  great  political  power  and  enjoying  immense 
pecuniary  advantages  from  their  connection  with  the  Government. 

The  modifications  of  the  existing  charter  proposed  by  this  act  are  not 
such,  in  my  view,  as^nmkgjt  consistent  with  the  rights  of  the  States  or  the 
lihertjes  of  the  people.  The  qualification  of  the  right  of  the  bank  to  hold 
real  estate,  the  limitation  of  its  power  to  establish  branches,  and  the  power 
reserved  to  Congress  to  forbid  the  circulation  of  small  notes  are  restric¬ 


tions  comparatively  of  little  value  or  importance.  All  the  objectionable 


principles  of  the  existing  corporation,  and  most  of  its  odious  features,  are 


retained  without  alleviation. 


The  fourth  section  provides  “  that  the  notes  or  bills  of  the  said  corpora¬ 
tion,  although  the  same  be,  on  the  faces  thereof,  respectively  made  payable 
at  one  place  only,  shall  nevertheless  be  received  by  the  said  corporation  at 
the  bank  or  at  any  of  the  offices  of  discount  and  deposit  thereof  if  tendered 
in  liquidation  or  payment  of  any  balance  or  balances  due  to  said  corpora¬ 
tion  or  to  such  office  of  discount  and  deposit  from  any  other  incorporated 
bank.”  This  provision  secures  to  the  State  banks  a  legal  privilege  in  the 
Bank  of  the  United  States  which  is  withheld  from  all  private  citizens.  If 
a  State  bank  in  Philadelphia  owe  the  Bank  of  the  United  States  and  have 
notes  issued  by  the  St.  Louis  branch,  it  can  pay  the  debt  with  those  notes, 
but  if  a  merchant,  mechanic,  or  other  private  citizen  be  in  like  circumstances 
he  can  not  by  law  pay  his  debt  with  those  notes,  but  must  sell  them  at  a 
discount  or  send  them  to  St.  Louis  to  be  cashed.  This  boon  conceded  to 
the  State  banks,  though  not  unjust  in  itself,  is  most  odious  because  it  does 
not  measure  out  equal  justice  to  the  high  and  the  low,  the  rich  and  the  poor. 
To  the  extent  of  its  practical  effect  it  is  a  bond  of  union  among  the  banking 


301 


N  at i o n a  l  M  o  n  et  a  r  y  Commission 


establishments  of  the  nation,  erecting  them  into  an  interest  separate  from 
that  of  the  people,  and  its  necessary  tendency  is  to  unite  the  Bank  of  the 
United  States  and  the  State  banks  in  any  measure  which  may  be  thought 
conductive  to  their  common  interest. 

The  ninth  section  of  the  act  recognizes  principles  of  worse  tendency  than 
any  provision  of  the  present  charter. 

It  enacts  that  “  the  cashier  of  the  bank  shall  annually  report  to  the  Sec¬ 
retary  of  the  Treasury  the  names  of  all  stockholders  who  are  not  resident 
citizens  of  the  United  States,  and  on  the  application  of  the  treasurer  of  any 
State  shall  make  out  and  transmit  to  such  treasurer  a  list  of  stockholders 
residing  in  or  citizens  of  such  State,  with  the  amount  of  stock  owned  by 
each.”  Although  this  provision,  taken  in  connection  with  a  decision  of  the 
Supreme  Court,  surrenders,  by  its  silence,  the  right  of  the  States  to  tax  the 
banking  institutions  created  by  this  corporation  under  the  name  of  branches 
throughout  the  Union,  it  is  evidently  intended  to  be  construed  as  a  conces¬ 
sion  of  their  right  to  tax  that  portion  of  the  stock  which  may  be  held  by 
their  own  citizens  and  residents.  In  this  light,  if  the  act  becomes  a  law, 
it  will  be  understood  by  the  States,  wrho  will  probably  proceed  to  levy  a 
tax  equal  to  that  paid  upon  the  stock  of  banks  incorporated  by  themselves. 
In  some  States  that  tax  is  now  i  per  cent,  either  on  the  capital  or  on  the 
shares,  and  that  may  be  assumed  as  the  amount  which  all  citizen  or  resi¬ 
dent  stockholders  would  be  taxed  under  the  operation  of  this  act.  As  it 
is  only  the  stock  held  in  the  States  and  not  that  employed  within  them 
which  would  be  subject  to  taxation,  and  as  the  names  of  foreign  stockholders 
are  not  to  be  reported  to  the  treasurers  of  the  States,  it  is  obvious  that  the 
stock  held  by  them  wall  be  exempt  from  this  burden.  Their  annual  profits 
will  therefore  be  i  per  cent  more  than  the  citizen  stockholders,  and  as  the 
annual  dividends  of  the  bank  may  be  safely  estimated  at  7  per  cent,  the 
stock,  will  be  worth  10  or  15  per  cent  more  to  foreigners  than  to  citizens  of 
t he_JJ nitcd-States .  To  appreciate  the  effects  which  this  state  of  things 
will  produce,  we  must  take  a  brief  review  of  the  operations  and  present 
condition  of  the  Bank  of  the  United  States. 

By  documents  submitted  to  Congress  at  the  present  session  it  appears 
that  on  the  1st  of  January,  1832,  of  the  twenty-eight  millions  of  private 
stock  in  the  corporation,  $8,405,500  were  held  by  foreigners,  mostly  of 
Great  Britain.  The  amount  of  stock  held  in  the  nine  Western  and  South¬ 
western  States  is  $140,200,  and  in  the  four  Southern  States  is  $5,623,100, 
and  in  the  Middle  and  Eastern  States  is  about  $13,522,000.  The  profits 
of  the  bank  in  1831,  as  shown  in  a  statement  to  Congress,  wrere  about 
$3,455,598;  of  this  there  accrued  in  the  nine  Western  States  about 
$1,640,048;  in  the  four  Southern  States  about  $352,507,  and  in  the  Middle 
and  Eastern  States  about  $1,463,041.  As  little  stock  is  held  in  the  West, 
it  is  obvious  that  the  debt  of  the  people  in  that  section  to  the  bank  is 
principally  a  debt  to  the  Eastern  and  foreign  stockholders;  that  the 
interest  they  pay  upon  it  is  carried  into  the  Eastern  States  and  into 


302 


Th  e  Secon  d  u  nit ed  States  Ba n  k 


Europe,  and  that  it  is  a  burden  upon  their  industry  and  a  drain  of  their 
currency,  which  no  country  can  bear  without  inconvenience  and  occasional 
distress.  To  meet  this  burden  and  equalize  the  exchange  operations  of 
the  bank,  the  amount  of  specie  drawn  from  those  States  through  its  branches 
within  the  last  two  years,  as  shown  by  its  official  reports,  was  about 
$6,000,000.  More  than  half  a  million  of  this  amount  does  not  stop  in 
the  Eastern  States,  but  passes  on  to  Europe  to  pay  the  dividends  of  the 
foreign  stockholders.  In  the  principle  of  taxation  recognized  by  this 
act  the  Western  States  find  no  adequate  compensation  for  this  perpetual 
burden  on  their  industry  and  drain  of  their  currency.  The  branch  bank 
at  Mobile  made  last  year  $95,140,  yet  under  the  provisions  of  this  act 
the  State  of  Alabama  can  raise  no  revenue  from  these  profitable  opera¬ 
tions,  because  not  a  share  of  the  stock  is  held  by  any  of  her  citizens.  Mis¬ 
sissippi  and  Missouri  are  in  the  same  condition  in  relation  to  the  branches 
at  Natchez  and  St.  Louis,  and  such,  in  a  greater  or  less  degree,  is  the 
condition  of  every  Western  State.  The  tendency  of  the  plan  of  taxa¬ 
tion  which  this  act__proposes  will  be  to  place  the  whole  United  States 
in  the  same  relation  to  foreign  countries  which  the  Western  States  now 
bear  to  the  Eastern.  When  by  a  tax  on  resident  stockholders  the  stock 
of  this  bank  is  made  worth  10  or  15  per  cent  more  to  foreigners  than  to 
residents,  most  of  it  will  inevitably  leave  the  country. 

Thus  will  tins' provision  in  its  practical  effect  deprive  the  Eastern  as 
well  as  the  Southern  and  Western  States  of  the  means  of  raising  a  revenue 
from  the  extension  of  business  and  great  profits  of  this  institution.  It 
will  make  the  American  people  debtors  to  aliens  in  nearly  the  whole  amount 
due  to  this  bank,  and  send  across  the  Atlantic  from  two  to  five  millions  of 
specie  every  year  to  pay  the  bank  dividends. 

In  another  of  its  bearings  this  provision  is  fraught  with  danger.  Of  the 
twenty-five  directors  of  this  bank  five  are  chosen  by  the  Government  and 
twenty  by  the  citizen  stockholders.  From  all  voice  in  these  elections  the 
foreign  stockholders  are  excluded  by  the  charter.  In  proportion,  there¬ 
fore,  as  the  stock  is  transferred  to  foreign  holders  the  extent  of  suffrage 
irTThe  choice  of  directors  is  curtailed.  Already  is  almost  a  third  of  the 
stock  in  foreign  hands  and  not  represented  in  elections.  It  is  constantly 
passing  out  of  the  country,  and  this  act  will  accelerate  its  departure.  The 
entire  control  of  the  institution  would  necessarily  fall  into  the  hands  of  a 
Tew  citizen  stockholders,  and  the  ease  with  which  the  object  would  be 
accomplished  would  be  a  temptation  to  designing  men  to  secure  that  con¬ 
trol  in  their  own  hands  by  monopolizing  the  remaining  stock.  There  is 
danger  that  a  president  and  directors  would  then  be  able  to  elect  them¬ 
selves  from  year  to  year,  and  without  responsibility  or  control  manage  the 
wFole  concerns  of  the  bank  during  the  existence  of  its  charter.  It  is  easy 
to  conceive  that  great  evils  to  our  country  and  its  institutions  might  flow 
from  such  a  concentration  of  power  in  the  hands  of  a  few  men  irresponsible 
to  the  people. 


w.' 


303 


A 


VV° 


>>  V>- 


N  at  ion  al  M  o  n  et  a  r  y  Commission 


Is  there  no  danger  to  our  liberty  and  independence  in  a  bank  that  in  its 
O  \  j*ina'ture  has  so  little  to  bind  it  to  our  country?  The  president  of  the  bank 
,  x  >  MV  has  told  us  that  most  of  the  State  banks  exist  by  its  forbearance.  Should 
its  influence  become  concentered,  as  it  may  under  the  operation  of  such 
(>  \  rc.  \  an  act  as  this,  in  the  hands  of  a  self-elected  directory  whose  interests  are 
,  ^'identified  with  those  of  the  foreign  stockholders,  will  there  not  be  cause  to 
tremble  for  the  purity  of  our  elections  in  peace  ancTTor  the  independence 
of  our  country  in  war?  Their  power  would  be  great  whenever  they  might 
choose  to  exert  it;  but  if  this  monopoly  were  regularly  renewed  every 
fifteen  or  twenty  years  on  terms  proposed  by  themselves,  they  might 
seldom  in  peace  put  forth  their  strength  to  influence  elections  or  control 
the  affairs  of  the  nation.  But  if  any  private  citizen  or  public  functionary 
should  interpose  to  curtail  its  powers  or  prevent  a  renewal  of  its  privileges, 
it  can  not  be  doubted  that  he  would  be  made  to  feel  its  influence. 

Should  the  stock  of  the  bank  principally  pass  into  the  hands  of  the  sub¬ 
jects  of  a  foreign  country,  and  we  should  unfortunately  become  involved 
in  a  war  with  that  country,  what  would  be  our  condition?  Of  the  course 
which  would  be  pursued  by  a  bank  almost  wholly  owned  by  the  subjects 
of  a  foreign  power,  and  managed  by  those  whose  interests,  if  not  affections, 
would  run  in  the  same  direction  there  can  be  no  doubt.  All  its  operations 
within  would  be  in  aid  of  the  hostile  fleets  and  armies  without.  Control¬ 
ling  our  currency,  receiving  our  public  moneys,  and  holding  thousands  of 
our  citizens  in  dependence,  it  would  be  more  formidable  and  dangerous 
than  the  naval  and  military  power  of  the  enemy. 

If  we  must  have  a  bank  with  private  stockholders,  every  consideration 
of  sound  policy  and  every  impulse  of  American  feeling  admonishes  that  it 
should  be  purely  A merican.  Its  stockholders  should  be  composed  exclusively 
of  our  own  citizens,  who  at  least  ought  to  be  friendly  to  our  Government  and 
willing  to  support  it  in  times  of  difficulty  and  danger.  So  abundant  is 
domestic  capital  that  competition  in  subscribing  for  the  stock  of  local 
banks  has  recently  led  almost  to  riots.  To  a  bank  exclusively  of  American 
stockholders,  possessing  the  powers  and  privileges  granted  by  this  act, 
subscriptions  for  $200,000,000  could  be  readily  obtained.  Instead  of 
sending  abroad  the  stock  of  the  bank  in  which  the  Government  must  de¬ 
posit  its  funds  and  on  which  it  must  rely  to  sustain  its  credit  in  times  of 
emergency,  it  would  rather  seem  to  be  expedient  to  prohibit  its  sale  to 
aliens  under  penalty  of  absolute  forfeiture. 

[Paragraphs  relating  to  question  of  constitutionality  are  omitted.] 

If  our  power  over  means  is  so  absolute  that  the  Supreme  Court  will  not 
call  in  question  the  constitutionality  of  an  act  of  Congress  the  subject  of 
which  “is  not  prohibited,  and  is  really  calculated  to  effect  any  of  the  ob¬ 
jects  entrusted  to  the  Government,”  although,  as  in  the  case  before  me,  it 
takes  away  powers  expressly  granted  to  Congress  and  rights  scrupulously 
reserved  to  the  States,  it  becomes  us  to  proceed  in  our  legislation  with  the 
utmost  caution.  Though  not  directly,  our  own  powers  and  the  rights  of 
the  States  may  be  indirectly  legislated  away  in  the  use  of  means  to  execute 


304 


The  S  e  con  d  United  States  Bank 


substantive  powers.  We  may  not  enact  that  Congress  shall  not  have  the 
power  of  exclusive  legislation  over  the  District  of  Columbia,  but  we  may 
pledge  the  faith  of  the  United  States  that  as  a  means  of  executing  other 
powers  it  shall  not  be  exercised  for  twenty  years  or  forever.  We  may  not 
pass  an  act  prohibiting  the  States  to  tax  the  banking  business  carried  on 
within  their  limits,  but  we  may,  as  a  means  of  executing  our  powers  over 
other  objects,  place  that  business  in  the  hands  of  our  agents  and  then  de¬ 
clare  it  exempt  from  State  taxation  in  their  hands.  Thus  may  our  own 
powers  and  the  rights  of  the  States,  which  we  can  not  directly  curtail  or 
invade,  be  frittered  away  and  extinguished  in  the  use  of  means  employed 
by  us  to  execute  other  powers.  That  a  bank  of  the  United  States,  compe¬ 
tent  to  all  the  duties  which  may  be  required  by  the  Government,  might  be 
so  organized  as  not  to  infringe  on  our  own  delegated  powers  or  the  re- 
erved  rights  of  the  States  I  do  not  entertain  a  doubt.  Had  the  Executive 
been  called  upon  to  furnish  the  project  of  such  an  institution,  the  duty 
would  have  been  cheerfully  performed.  In  the  absence  of  such  a  call  it 
was  obviously  proper  that  he  should  confine  himself  to  pointing  out  those 
prominent  features  in  the  act  presented  which  in  his  opinion  make  it  in¬ 
compatible  with  the  Constitution  and  sound  policy.  A  general  discussion 
will  now  take  place,,  eliciting  new  light  and  settling  important  principles; 
and  a  new  Congress,  elected  in  the  midst  of  such  discussion,  and  furnishing 
an  equal  representation  of  the  people  according  to  the  last  census,  will  bear 
to  the  Capitol  the  verdict  of  public  opinion,  and,  I  doubt  not,  bring  this 
important  question  to  a  satisfactory  result. 

Under  such  circumstances  the  bank  comes  forward  and  asks  a  renewal 
of  its  charter  for  a  term  of  fifteen  years  upon  conditions  which  not  only 
operate  as  a  gratuity  to  the  stockholders  of  many  millions  of  dollars,  but. 
will  sanction  any  abuses  and  legalize  any  encroachments. 

Suspicions  are  entertained  and  charges  are  made  of  gross  abuse  and  vio¬ 
lation  of  its  charter.  An  investigation  unwillingly  conceded  and  so  re¬ 
stricted  in  time  as  necessarily  to  make  it  incomplete  and  unsatisfactory 
discloses  enough  to  excite  suspicion  and  alarm.  In  the  practices  of  the 
principal  bank  partially  unveiled,  in  the  absence  of  important  witnesses, 
and  in  numerous  charges  confidently  made  and  as  yet  wholly  uninvesti¬ 
gated  there  was  enough  to  induce  a  majority  of  the  committee  of  investi¬ 
gation — a  committee  which  was  selected  from  the  most  able  and  honorable 
members  of  the  House  of  Representatives — to  recommend  a  suspension  of 
further  action  upon  the  bill  and  a  prosecution  of  the  inquiry.  As  the  char¬ 
ter  had  yet  four  years  to  run,  and  as  a  renewal  now  was  not  necessaryTo The 
successful  prosecution  of  its  business,  it  was  to  have  been  expected  that  the 
bank  itself,  conscious  of  its  purity  and  proud  of  its  character,  would  have 
withdrawn  its  application  for  the  present,  and  demanded  the  severest 
scrutiny  into  all  its  transactions.  In  their  declining  to  do  so  there  seems 
to  be  an  additional  reason  why  the  functionaries  of  the  Government  should 
proceed  with  less  haste  and  more  caution  in  the  renewal  of  their  monopoly. 


7069 — 10 


20 


305 


N  at  ion  a  l  M  o  n  et  a  r  y  Commission 


The  bank  is  professedly  established  as  an  agent  of  the  executive  branch 
of  the  Government,  and  its  constitutionality  is  maintained  on  that  ground. 
Neither  upon  the  propriety  of  present  action  nor  upon  the  provisions  of  this 
act  was  the  Executive  consulted.  It  has  had  no  opportunity  to  say  that  it 
neither  needs  nor  wants  an  agent  clothed  with  such  powers  and  favored  by 
such  exemptions.  There  is  nothing  in  its  legitimate  functions  which  makes 
it  necessary  or  proper.  Whatever  interest  or  influence,  whether  public  or 
private,  has  given  birth  to  this  act,  it  can  not  be  found  either  in  the  wishes 
or  necessities  of  the  executive  department,  by  which  present  .action  is 
deemed  premature,  and  the  powers  conferred  upon  its  agent  not  only  un¬ 
necessary,  but  dangerous  to  the  Government  and  country. 

It  is  to  be  regretted  that  the  richjmd  powerful  too  often  bend  the  acts 
oU~goveTnment  to  their  selfish  purposes.  Distinctions  in  society  will 
alwaysf  exist  under  every  just  government.  Equality  of  talents,  of  edu¬ 
cation,  or  of  wealth  can  not  be  produced  by  human  institutions.  In 
the  full  enjoyment  of  the  gifts  of  Heaven  and  the  fruits  of  superior  indus¬ 
try,  economy,  and  virtue,  every  man  is  equally  entitled  to  protection  by 
law;  but  when  the  laws  undertake  to  add  to  these  natural  and  just  ad¬ 
vantages  artificial  distinctions,  to  grant  titles,  gratuities,  and  exclusive 
privileges,  to  make  the  rich  richer  and  the  potent  more  powerful,  the 
humble  members  of  society — the  farmers,  mechanics,  and  laborers — who 
have  neither  the  time  nor  the  means  of  securing  like  favors  to  themselves, 
have  a  right  to  complain  of  the  injustice  of  their  Government.  There 
are  no  necessary  evils  in  government.  Its  evils  exist  only  in  its  h^usesT 
If  it  would  contilfe  itseffto  equal  protection,  and,  as  Heaven  does  its  rains, 
shower  its  favors  alike  on  the  high  and  the  low,  the  rich  and  the  poor,  it 
would"  be  an  unqualified  blessing.  In  the  act  before  me  there  seems  to 
be  a  wide  and  unnecessary  departure  from  these  just  principles. 

Nor  is  our  Government  to  be  maintained  or  our  Union  preserved  by 
invasions  of  the  rights  and  powers  of  the  several  States.  In  thus  attempt¬ 
ing  to  make  our  General  Government  strong  we  make  it  weak.  Its  true 
strength  consists  in  leaving  individuals  and  States  as  much  as^possi'ble'To 
themselves — in  making  itself  felt,  not  in  its  power,  but  in  its-  beneficence ; 
not  mils  control,  but  in  its  protection;  not  in  binding  the  States  more 
closely  to  the  center,  but  leaving  each  to  move  unobstructed  in  its  proper 
orbit. 

Experience  should  teach  us  wisdom.  Most  of  the  difficulties  our  Govern¬ 
ment  now  encounters  and  most  of  the  dangers  which  impend  over  our 
Union  have  sprung  from  an  abandonment  of  the  legitimate  objects  of 
Government  by  our  national  legislation,  and  the  adoption  of  such  principles 
as  are  embodied  in  this  act.  Many  of  our  rich  men  have  not  been  content 
with  equal  protection  and  equal  benefits,  but  have  besought  us  to  make 
them  richer  by  act  of  Congress.  By  attempting  to  gratify  their  desires  we 
have  in  the  results  of  our  legislation  arrayed  section  against  section,  interest 
against  interest,  and  man  against  man,  in  a  fearful  commotion  which 


306 


The  S  e  con  d  u  nit  ed  States  Bank 


threatens  to  shake  the  foundation  of  our  Union.  Jt  is  time  to  pause  in  our 
career  to  review  our  principles,  and  if  possible  revive  that  devoted  patriot¬ 
ism  and  spirit  of  compromise  which  distinguished  the  sages  of  the  Revolu¬ 
tion  and  the  fathers  of  our  Union.  If  we  can  not  at  once,  in  justice  to 
interests  vested  under  improvident  legislation,  make  our  Government  what 
it  ought  to  be,  we  can  at  least  take  a  stand  against  all  new  grants  of  monopo¬ 
lies  and  exclusive  privileges,  against  any  prostitution  of  our  Government  to 
the  advancement  of  the  few  at  the  expense  oMdie  many,  and  in  favor  of 
compromise  and  gradual  reform  in  our  code  of  laws  and  system  of  political 
economy. 

I  have  now  done  my  duty  to  my  country.  If  sustained  by  my  fellow- 
cmzens,  I^shaTTbe  grateful  ancT  li’appy ;  if  not,  I  shall  find  in  the  motives 
which  impel  me  ample  grounds  for  contentment  and  peace.  In  the  diffi¬ 
culties  which  surround  us  and  the  dangers  which  threaten  our  institutions 
there  is  cause  for  neither  dismay  nor  alarm.  For  relief  and  deliverance  let 
us  firmly  rely  on  that  kind  Providence  which  I  am  sure  watches  with 
peculiar  care  over  the  destinies  of  our  Republic,  and  on  the  intelligence  and 
wisdom  of  our  countrymen.  .  Through  abundant  goodness  and  their 
patriotic  dev  otion  our  liberty  and  Union -will  be  preserved. 


307 


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BOSTON  COLLEGE 


9031 


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